No two ways about it: The travel industry loves fees. Airlines in particular.
A few days ago, Canada’s Porter Airlines slapped a new $25 checked-baggage fee on all flights between the USA and Canada. The carrier, which promises to bring “dignity and refinement back to flying,” said it needed the extra money to stay “competitive.” And of course the US Department of Justice cited the rise of airline fees as a reason it sued to block the planned merger of American Airlines and US Airways.
Porter has a long way to go before its passengers storm away from the ticket counter in disgust. Other travel companies are light years ahead of the airline, whether it’s hotels that charge mandatory “resort” fees on top of their room rates, airlines that make you pay for your carry-on bag or car rental companies that add nuisance “tire disposal” fees to your bill.
Will travel industry fee frenzy reach its limit?
The real question everyone wants answered is this: How much is too much? When will the travel industry’s fee revolution finally fizzle?
To find the answer, it helps to know the extent of the problem.
Basically, fees are out of control. For example, the global airline industry earned $2.3 billion in ancillary revenues in 2006, according to airline consulting firm IdeaWorks. Six years later, that number had ballooned to $27 billion.
Anecdotal evidence suggests other travel-related companies are trying to follow that ambitious trajectory, although it’s difficult to know how successful they’ve been because they aren’t subject to the same stringent reporting requirements as airlines. Among the most noteworthy extras: casinos and independent hotels that charge non-negotiable “resort” fees, such as the Golden Nugget Las Vegas, which recently added a mandatory $5 nightly “downtown destination” fee to its room rates.
Travelers are reaching a tipping point
Travelers say they’re sick of being nickel-and-dimed. “We’re being fee’d to death,” says Marty Lewis, a minister from Dallas. “Baggage charges, seat charges and so forth — I’m surprised there’s no charge to use airlines’ spacious bathrooms.”
Interestingly, the Federal Trade Commission, which is supposed to protect us from anti-competitive, deceptive or unfair business practices, calls the system of adding fees to your final bill “drip” pricing. It warned several hotels about their pricing earlier this year, although the practice appears to have continued virtually uninterrupted. Like water-drip torture, it may be only a matter of time before travelers snap.
Some are already on the run. “I refuse to stay at places that charge a resort fee,” says Rosheen McGowan, a homemaker from Dumfries, Va. The reason: By definition, the room rate should also cover the resort amenities such as the pool towels, gym and concierge services.
Where do travelers draw the limit?
“I always check before I book, and make sure there is no such fee,” she says. “There are too many other places to stay, and I want to give them my vacation money.”
But that isn’t always possible when you’re flying and have only a few choices. How can someone travel without luggage? wonders Savi Mull, a program officer for a non-profit organization based in New Delhi and Washington. Since almost all the airlines now charge for checked luggage, what choice do passengers have but to pay the fees? But her breaking point came when IndiGo Airlines, an India-based discount carrier, asked her to pay extra to reserve a middle seat. “That’s a way to snatch money in the rudest way possible,” she says. (Related: Hidden airline fees are everywhere.)
Travelers have a personal line they won’t cross, whether it’s a reservation fee or a resort surcharge. But is there a point when everyone agrees that enough is enough? In at least one sense, we may have reached that point without even realizing it.
The path to curbing fees
The growth rate for two key airline fees — cancellation and change fees, and baggage fees — has stalled in recent years. From 2011 to 2012, for example, reservation change-related revenue increased by $174 million
industry-wide, from $2.38 billion to $2.55 billion. For baggage fees, it was a $126 million increase, inching from $3.36 billion to $3.48 billion, according to the U.S. Department of Transportation.
But in another sense, travel fees are a “growth” business, says William Maloney, who founded a website called FeeZing.com that helps consumers track fees. He says stopping them will require a concerted effort, including pressure from consumers and from large online travel agencies. Until now, those agencies have been complicit in the fee revolution, because they haven’t insisted on full disclosure of fees before booking.
It’s going to get worse before it gets better, he predicts. “Based on the spread of fees in Europe and Asia, I think fees will only get worse here in the United States,” he says.
Escalation of travel fees
Until travelers vote with their wallets, companies will continue to push the limits, says Jay Sorensen, president of IdeaWorks. He points out that the most fee-aggressive air carriers, including Air Asia, Ryanair and Spirit Airlines, somehow manage to extract high fees from their passengers and keep them as customers.
“Of course, there is a limit,” he says. “When fees rise too high, traffic will drop, and so will revenue.” (Here’s how to survive a long flight in economy class and avoid jet lag.)
Who will call an end to this fee madness? Not the government, which has taken a hands-off approach. Not the companies, which can’t resist the revenue fees bring in.
Only one person has the ability to end this revolution: you.