FTC warns hotels about ‘drip pricing,’ but is it enough?

Consumers continue to get dinged and, worse, surprised by “resort� fees that often aren’t quoted upfront in the hotel booking process. This one lump-sum fee often covers such items as phone calls, bottled water, Internet access, access to the pool or spa or other services that guests may or may not use. In September, two On the Spot columns dealt with those fees. When I contacted three consumer advocates who were active about the issue, they had just received a reply to a letter of complaint that they had sent to the Federal Trade Commission. In November, the FTC took more action, which is good news for consumers. But does it solve the problem?

In May, the FTC hosted a conference on what it calls “drip pricing,� which it described as “a technique in which firms advertise only part of a product’s price and reveal other charges later as the customer goes through the buying process. The additional charges can be mandatory charges, such as hotel resort fees or fees for optional upgrades and add-ons.�

Sound familiar? Kevin Mitchell, chairman of the Business Travel Coalition; Charlie Leocha, executive director of the Consumer Travel Alliance; and Ed Perkins, a longtime consumer advocate, think it does. In an August letter to the FTC, the three wrote: “Mandatory artificial fees … can make a hotel’s posted rate appear to be below the true price by as much as $30 a night — more than enough to drive consumer choices in the travel marketplace.� They noted that the practice makes it difficult to determine how much your final bill will be, which hurts leisure and business travelers who must be attentive to the bottom line.

The next month, the three received what appeared to be a form letter response that said, in part, “The commission does not resolve individual complaints. The commission can, however, act when it sees a pattern of possible violations developing.�

Apparently it did see that pattern. In late November, the FTC warned 22 hotels that the practice of adding resort fees might violate the law.

The commission “conducted its own independent investigation,� said Annette Soberats, the lead attorney for this investigation who works in advertising practices at the FTC’s Bureau of Consumer Protection. “The warning letters were sent to 22 hotels and copies of the letters were sent to corporate headquarters of hotels,� she said.

“We wanted to give the hotels and the travel industry a chance to clean up their act and thought a warning was the most appropriate way to do that.�

But is it enough? The FTC did not disclose which hotels, so there’s no way to know whether it’s one independent hotel or one that’s affiliated with a larger group that would feel the ripple effect. The American Hotel & Lodging Assn. says there were 52,214 properties in this $137-billion-a-year industry in 2011. By my calculation, 22 hotels is .042% of the whole, which is actually worse than the Lakers’ winning percentage.

“I think the warning was a smart initial step,� Mitchell said. “It would be useful to now provide detailed guidance to the hotel industry and if it is not followed, then FTC should strongly consider taking regulatory action based on its Section 5 authority to police unfair and deceptive practices.�

Leocha said, “It may be enough, but I haven’t seen any changes in practices yet.�

Transparency can’t come too soon for consumers. Until then, if you have a complaint, call (877) FTC-HELP (382-4357) or go to https://www.ftccomplaintassistant.gov. (If using the Internet form, note a slight deviation in the URL: Be sure to add the S on the end of http to go directly to the page.)

Living wage follow-up: Thomas Bliss, of Sherman Oaks, responding to a Jan. 27 “Spot� column (“Tipping Points�) on how to tip a food service worker who is paid a living wage, wrote a letter to the editor last week but says his message was muddled in the editing. His point: Tip as you usually tip, he said in a follow-up note. Few food service workers are getting rich, whether they’re getting paid the $8 minimum that California decrees or the $11.37 that a Massachusetts Institute of Technology chart calculates is a living wage in Los Angeles. To see that living wage calculator, go to livingwage.mit.edu.

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