Why you’re stealing from your travel company

When you think of stealing from a travel company, swiping a towel or bathrobe from a hotel probably comes to mind.

Howard Lo admits he’s taken an item or two when he was younger. Lately, he says, he’s come to understand that stealing is stealing. Staying at an Airbnb rental, where the towels belonged to a person and not a corporation, really crystallized the issue.

Elliott Advocacy is underwritten by Fareportal. Fareportal’s portfolio of brands, which include  CheapOair and  OneTravel, are dedicated to helping customers enjoy their trip. Whether you want to call, click, or use one of our travel apps, one thing is clear: We make it easy to take it easy.

“I know better now,” says Lo, who runs a technology company in San Francisco.

When a travel company thinks of stealing, it’s probably not worried about soap or mugs. Instead, companies are concerned with the opportunities you take from them — specifically, opportunities to make more money.

Two recent events have brought this peculiar definition of theft to the fore. The first is proposed new legislation that would stop airlines from imposing fees that are “unreasonable or disproportional to the costs incurred by the air carrier.” That bill, which I mentioned in last week’s column, illuminated the high fees charged by travel companies, especially airlines. The second is a recent report that the top three U.S. airlines — American, Delta and United — made a combined $14.5 billion in so-called ancillary revenue from fees and the sale of frequent-flier miles.

Travel companies depend on fees obviously. If you’ve wondered why these surcharges are so high — why an airline can charge up to $500 to change a ticket or why a hotel bills you for one night’s stay when you cancel — you’re probably not thinking like a travel insider.

How do insiders see it? Monte Gardiner, the senior director for revenue management at Best Western Hotels and Resorts, explains that every room is an opportunity for a hotel to earn money. When you cancel your reservation, you’re depriving the hotel of the ability to resell a room, maybe at a higher rate.

“That’s especially true when the hotel is full,” he says.

Similarly, airlines charge sky-high change fees not because it costs $200 to change your ticket but because they lose the opportunity to sell a seat, perhaps increasing their margin in the process. Airlines don’t necessarily see change fees as related to the cost of the transaction but instead as covering a lost opportunity cost.

“There’s no cost-based justification for these fees,” says Robert Cross, chairman of Revenue Analytics, an Atlanta-based consulting company.

“I think the fees are meant to close the gap between what the airlines could be getting for their seats and what they get,” he says, noting that high change fees could be seen as a sign that “they’re not pricing the seats properly to begin with.”

It’s hard for passengers to wrap their heads around that kind of travel-think, so let me put it in different words: It’s not just that travel companies want the money for your room or your seat. They also want you to pay for depriving them of other opportunities to make money.

Hence this novel version of theft: You’re stealing a travel company’s opportunity to make money.

In this framework, such “theft” is justified by companies in much the same way it is by guests, says Michael Brein, a psychologist who specializes in travel. For example, a guest might rationalize stealing a bathrobe or towel, “because the hotel room is expensive,” he says. In the same way, a company might argue that the high cost of doing business, or consumers’ demands for the lowest rates, justify exorbitant change fees.

Letting this travel-think stand unchallenged is asking for trouble. Imagine if the tables were turned, and you could bill an airline after your delayed flight made you miss an important business meeting. Is the company responsible for the deal that never happened? What if you could recover the cost of a missed vacation day? Can you say “chaos”?

That’s how travelers see it.

“Are you kidding me?” asks Paul Jones, a former airline employee and current massage therapist from Buffalo. “Of course, a business shouldn’t be able to charge for lost revenue for a missed opportunity to sell something at a higher price.”

Jennifer Owens, a retired librarian from Lake Villa, Ill., says charging for a missed revenue opportunity sets a troubling precedent because it means companies might be responsible for her missed opportunities.

“It puts a false price on your service or commodity,” she says. “Seems to me a circumvention of the idea of free enterprise.”

The fix is easy: The fees must be appropriate. All charges must be refunded when the room or seat is resold. Anything else is stealing.

How to make fees fair again

• Support legislation like the FAIR Fees Act. The Forbid Airlines from Imposing Ridiculous (FAIR) Fees Act, introduced by Sen. Ed Markey, D-Mass., may be taken up by Congress again when it considers the next Federal Aviation Reauthorization Bill. It would prohibit airlines from imposing fees that are “unreasonable or disproportional to the costs incurred by the air carrier.” Such legislation could even out some of the unfair fees.

• Tell the U.S. Department of Transportation (DOT). The DOT collects and reports complaints from air travelers. If enough passengers complain about fees, the department may act to stop these fees from expanding. The easiest way to complain is through its website.

• Vote with your wallet. Don’t buy rooms or tickets from companies that have overly restrictive change policies or high change fees. Giving them your money only encourages them to raise those fees — and to make their policies more restrictive. You should get more for your money, not less.

34 thoughts on “Why you’re stealing from your travel company

  1. Some great thoughts. However, it is going to take the public, in mass, writing to their elected representatives, demanding that changes be made; i.e. legislation like the FAIR Fees Act being passed into law. Once again, though, it will only happen if enough people press their legislators.
    We all need to do our part.

    1. elected representatives especially in good ol USA are almost the most corrupt in the whole world. A few airline tickets can buy most off.

  2. While I like the idea overall, who gets to determine what is “unreasonable or disproportional to the costs incurred”? While a $500 change fee seems unreasonable to most of the traveling public, I’m sure there is an accountant working for the airline that charges that fee who can justify it.

    1. I would really enjoy you giving us an example of what kind of fee for $500 could be justified?
      Over weight luggage, ticket change,seat change, ???

  3. Here’s the logic flaw. If companies charge a flat rate for a product then they would lose opportunity if you canceled (especially at the last minute). But they don’t. The price goes up the closer you get to the date of use. That means that they lose an opportunity to make money when you book earlier at at lower price and then actually use the product.
    Let’s call it what it is – double dipping. When you make a change they get money once via increased product cost for the same product. They get it a second time via change fees.

  4. What we need is a reasonable set of laws to keep companies from doing what is entirely unreasonable (i.e. resort fees). Another thing I’ve found completely unreasonable is what I see in Marriott’s cancellation fee in Germany. Most places (Including Marriott in most countries), if you cancel past the cancellation deadline, which is now commonly the day before, they will charge you one night’s room. However, this policy I see at Marriott in Germany, they seem to take about 90% of the entire stay!

    I don’t find this reasonable at all and I don’t know why there hasn’t been more of an uproar about it. Since I am a person who does read the T&C, you are not likely to see me having to complain about being charged. However, I am staying at a different hotel chain when I go to Germany (as I did last time). I would certainly like to see this legislated away though.

  5. I love that the same hotel that will charge you one night’s stay if you cancel, will also overbook to have the room covered just in case you cancel.

  6. The vast majority of the population does not take a flight or use a hotel room (beyond a cheap roadside motel) in any given decade, let alone frequently enough to care about these issues. Thus there can never be a loud enough voice in the legislature to change a system that is very valuable to industry. So, no change will occur through the legislative route.

    What can work is for the sellers (them) to devise a fairer system that is, as they say, revenue neutral, or even more profitable, while being perceived as a better choice by the buyers (us). For instance, airline tickets are either highly restricted and full of fees and penalties, or very expensive but all-inclusive and changeable. What if there were a third type of ticket, which would be more expensive than basic, would include the commonest services that otherwise would have a fee, and cost less than basic plus fees, if only by a small amount.

    Then have a sliding scale change fee depending on time before the flight, and, until a week before, a not crazy amount. Then make refund credits good for a year from time of credit, rather than from original purchase time, and make them transferable for a reasonable fee. Now every big complaint is obviated, and the airlines and their actuaries can set the price of the new type of ticket so that there will be no loss of income.

    Win-win, except that effective monopolies don’t care enough to do anything. As was said by a comedienne several decades ago: “We don’t care. We don’t have to.”

    1. JetBlue kind of does something like that with its blue flex, etc fares and a sliding scale of fees so there’s more of middle ground. Every time I’ve ever cancelled travel plans, I always wished I had opted for the pricier refundable, but when I go, I’m glad I selected the less expensive option.

  7. Ha, good post. I can’t imagine using AirBNB, seriously, for reasons that will take more room than you permit here. I do occasionally take shampoo or body wash from the random Marriott or Hilton, the housekeeping staff gives them to me anyway.

    Anything else, no. I don’t see this as a quid pro quo to my room charge. And if you don’t have enough consumables at home, that’s a really bad problem on your part.

  8. Why “shouldn’t” you be able to charge for missed revenue? If an asset is sitting around idle, somebody’s going to have to pay for it. Why should it be the business, or all customers equally? Charging the customer responsible for the idleness makes perfect sense to me.

    I think the way some fees are charged is needlessly customer-hostile, but that’s not an indictment against the idea of such a fee.

    (You’ll get no argument from me on non-negotiable resort fees, or other mandatory things that should absolutely be included in the original stated price. (Telco billing also really gets me going…)

    1. Who should they charge for the seats they never sold in the first place? How about billing the magazine or website whose ads didn’t work well enough to sell the flight? Who should that magazine charge for the advertising space it hoped to sell but didn’t?

      Who should I charge for the time I’m not being paid because a freelance client cancels a project halfway through? Can I bill you for the company that dropped me silently mid-job after they ignored me for two months, then sent me the next piece of work with a deadline that would have used up my entire vacation time in a foreign country, because by your logic I should be able to charge someone for the loss?

      Everyone has “opportunity cost” in that sense, and it makes sense to think “I can take this job, and get so many dollars, but will it make up for the airfare I’ve already spent, or my disappointment at not getting to enjoy this trip?” That’s why I said “I can do this, but not by Monday.” It wouldn’t have entitled me to do the job and send an invoice for the agreed-on amount, plus the round-trip fare and taxes, plus a surcharge for ruining my vacation.

    2. It seems (to me) that over the past several years, the idea has evolved that customers are responsible for the cost of doing business in the travel services market. I have no idea what kind of work you do, but if you’re in retail, do you charge your customers a line item for the cost of receipt paper? If you’re in accounting, do you charge your customers a line item for the cost of paper clips or the electricity used to run the computers? If you’re a consultant, do you send a bill to every customer that changes the time of a meeting? This seems like what the airlines (and hotels and rental car companies) are doing, and I understand neither the business model nor why customers put up with it.

      Edit: Also, “missed revenue” is misleading, because what’s actually lost is potential, and that potential only exists if you have no other seats, rooms, cars, etc. in the same category as the one that was the subject of the cancellation or change. The airline asserting that it lost money by moving a ticketed passenger from one flight with open economy seats to another flight with open economy seats is simply untrue.

      1. You don’t charge retail customers for receipt paper, for the same reason the airline doesn’t separately bill you for the pilot, co-pilot, etc.; they are in extricable part of the basic product.

        If you make a change to your airline reservation, that represents something that is not inevitable. They could choose to roll in that cost (like Southwest), or they can charge for it. Somebody’s gotta pay for that cost, and it’s a business decision as to who.

        As far as change fees in general go: It’s not practical to individually examine each departed flight and only then decide who pays what for cancellations. If you leave with six empty seats and had ten cancellations over the last year, who gets the money? How much? A fee, no matter how full the flight was, where it was going, etc. is not the worst system to use.

        1. The fare difference (which even Southwest charges) does correspond to a cost or perishable value that is in some sense ‘real.’

          But the change fee? That’s mostly pure profit. Even if a well-compensated human being enters the change manually, the ‘real’ cost is a trivial portion of the actual fee charged.

          1. The fare difference covers the cost of your new flight; it doesn’t cover the possible loss of revenue for the old seat. And yes, that possible loss is difficult to quantify, but that doesn’t make the possible loss any less ‘real’.

            (And I’ve never argued that the logistics of the actual reservation record changing was any significant cost at all.)

          2. On average, if there is no fare difference then there is no loss of revenue for the old seat. Don’t forget that the carriers overbook flights if they can.

            If there is a negative fare difference then, on average, the change is actually advantageous to the carrier.

  9. I imagine hotels love when you take the bathrobe. Then it gets to bill your credit card $300 for a used robe. I agree about the fees though. If the seat/room is resold then only a nominal administrative fee seems fair- nothing close to today’s change fees. I wonder how this could work practically, however. Like the hotel holds the money until it resells the room and you get your refund then? There is probably some computer program that deals with this. We all know travel companies have complex inventory algorithms to change the price of a ticket 200 times between flight and purchase so this shouldn’t be a stretch. Planes always seem full these days.

  10. And how about writing to your Congress men and women and Senators for full fare disclosure, that they still won’t put through thanks to the strong airline lobbyists?

    1. Errr… we DO have full fare disclosure (this was put in place a few years ago; Spirit, et al, made a big stink about it); the recently introduced “Transparent” airfares act actually is the exact opposite of what you’d think. It’s the airlines that are pushing for it to be enacted.

      1. To this very day, air carriers do not need to disclose their full “tariff” rules for your purchase online or anywhere else except upon request at their physical airport and city ticket counters.

        1. The question was about fare disclosure, not the full tariff. And every time I’ve purchased a ticket, I’ve been offered the option to read the entire fare rules should I so choose; no visit to the airline counter necessary. (Do airlines even have city ticket offices anymore?)

          And there’s no pending legislation to change that; I suspect the parent post was referring to the incorrect article mentioning the so-called “Transparent Airfares Act” a couple weeks back.

          1. I’m not sure what Annie refers to specifically. We do already have the Full Fare Advertising Rule, which is a good start. But now airlines play the cat and mouse game of hiding the true cost of travel up front, and catching customers with ancillary fees and new restrictions later.

            The disclosure rules with respect to those latter areas are either obsolete or inadequate (speaking for myself, not Annie or Chris).

            A few US ticket offices still exist, but, yes, exactly, they have mostly disappeared outside of a few major urban transit hubs (generally with direct links to major international airports).

            https://www.aa.com/i18n/customer-service/contact-american/ticket-sales-centers.jsp
            https://www.united.com/web/en-US/content/contact/reservations/usandcanada.aspx

            BTW, just because you are offered the option to read the “fare rules” online don’t assume they are complete. TAs in the forums have occasionally quoted provisions from their GDS which are not shown when booking the same fare basis over the web. (Not to mention how cryptic the rule abbreviation jargon is even when displayed completely)

  11. I believe that airfare should be sort of the way cruises are in that if you’re 30+ days out no change fee; if you’re two weeks out X change fee; if you’re one week out X plus change fee; and if you’re if you’re within three days out tough boogies–you’ve lost your right to get a refund or something along those lines. The closer you get to a flight the less likely the airline is to be able to sell your seat, so I get it. They’ve counted on your revenue, but if you cancel or change a flight a month or two months or three months out there’s a really good chance they’re going to sell that seat and charging exorbitant change fees is just punitive. Hotels I’m a little iffier on because they do tend to over book their rooms anyway and the hotels we tend to stay at–because we’re members of their loyalty programs–we can typically cancel up to 6 PM on the night of arrival, which really kind of sticks it to them if we decide at the last minute not to come.

  12. Airline change fees are the most problematic and the ones I consider unethical, since the route doesn’t matter. Take flights to Honolulu, almost always oversold and/or filled to the brim. I can understand a fee on that. But then take Chicago to Minneapolis. Between the carriers and the 2 airports in Chicago, there are about 50 or more flights a day. Some are full and some are half empty. All the flights are due to competition. So, why should I be charged the same fee as an HNL flight, when the MSP flights, I’m just paying for competition. The carriers can justify it in a myriad of ways, but I don’t buy it. And I don’t think the American public knows just how much they are getting fleeced.

    1. Dynamically adjusting every fare to adjust change fees based on the length of the flight, expected revenue per seat, and expected occupancy, is theoretically possible, but not really practical.

      I think a time-varied scale would make more sense than the current system, but not necessarily a wildly unstable dynamic system.

  13. So when the law gets passed, I wonder if the same group that’s screaming about the change fees is going to scream that their tickets can no longer be changed due to this bill.

  14. “Similarly, airlines charge sky-high change fees not because it costs $200 to change your ticket but because they lose the opportunity to sell a seat, perhaps increasing their margin in the process. Airlines don’t necessarily see change fees as related to the cost of the transaction but instead as covering a lost opportunity cost.”
    —————-
    Yet the airlines have no problem OVERSELLING seats in advance which covers last minute passenger cancellations or no-shows. They also fail to mention that a lot of people will pay $75 or more to “same day change” or standby to another flight. They are filling planes 85% to 90% or more + the ancillary bag fees etc. but they keep crying “loss”. Believe me, they have it down to a science and THEY ARE NOT LOSING MONEY. The only people buying last-minute exorbitant airfares are people needing to travel on business or personal reasons for emergencies. They have us by the short-hairs and still cry about losing money.

  15. I much prefer the current structure to the European model, where discounted plane tickets are typically not changeable or refundable. You buy a ticket to fly from X to Y on Z date. Period. Want to change the time or date? Buy a new ticket.

  16. In my opinion the point that is being missed is that excessive fees – ‘necessary’ or otherwise – that alienate their paying customers. You’re almost guaranteed to have lost their future business.

    We have a photo travel business, and when making reservations for this that and the other, the entities that make us liable for a cancellation fee the moment the reservation has been made are biting the hand that feeds them.

    Sure, we would expect a charge for a late cancellation or say up to three months out – assuming those fees are clearly shown and reasonable – but charging a fee when canceling a year in advance is counter productive for any business. Consequently we take any future business elsewhere.

    Our own tours are non-refundable 30 days out, but when something unavoidable came up with customers on two different occasions, we broke our own ‘rules’ and refunded as much as was possible.

    This makes good business sense as they’re more likely to return . . . . plus it’s the right thing to do . . . isn’t it?

  17. be VERY careful what you wish for. If you wish for no charges to change cheap tickets, airlines might simply say no charges AT ALL are possible.

  18. I consider it a penalty for NONrefundable. Business is to make money, it’s silly to think otherwise. Entitlement bothers me. Don’t like the rules? Go elsewhere. I sound grouchy but world we’ve created is nasty. We don’t know what costs are involved in refunds. I know in my small business when 1 item is returned it takes 4 more to make it whole again (with all costs involved). So you want changes? Pay more when it allows it.

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