Consumer protection enforcers may be on the lookout for misleading hotel and resort rates and fees this summer travel season. This includes state attorneys general (AGs), who have announced multiple lawsuits and settlements regarding "hidden resort fees" in recent years.
While AGs have generally used state consumer protection laws in these enforcement actions, which are inherently broad in scope, there is also an increased legislative focus on hidden fees. For instance, California has passed a first-in-the nation law effective July 1, 2024, specifically requiring disclosures of all mandatory fees within a total price, including in the lodging industry. (The California AG's Office has released FAQs related to the law.) Stay tuned for more on hidden fee legislation in an upcoming post.
What major actions have AGs taken to date?
The FTC first sounded the alarm in 2012 with a warning letter accusing hotels of unlawful "drip pricing" by not including resort fees in advertised daily room rates. Then, in 2016, a coalition of AGs launched a multistate investigation into whether disclosures of hotel fees violated state consumer protection laws. In 2019, Nebraska sued Hilton and Washington DC sued Marriott, beginning the resort fee enforcement actions by the states. Since that time, multiple lawsuits and settlements have been filed regarding hidden resort fees.
For instance, Choice Hotels International has settlements with Colorado, Nebraska, Oregon, Texas, and Pennsylvania. Also regarding Choice Hotels, Maryland successfully sued to enforce a subpoena served on the company and recently, the state filed a petition for constructive civil contempt for alleged failure to comply with the court order; the matter is ongoing. Another major hotel company, Omni Hotels, has settlements with Colorado, Nebraska, Pennsylvania and Texas.
Meanwhile, litigation against Marriott International continues in Washington DC, while Colorado, Nebraska, Pennsylvania, and Texas have settled with the chain. Regarding Hilton, Texas sued with litigation ongoing, while Nebraska settled its suit. In separate lawsuits, Texas also sued Hyatt Hotels Corporation and Booking Holdings Inc., which includes online travel companies such as Booking.com, Priceline, Agoda, Rentalcars.com, KAYAK, and Opentable, with litigation ongoing in each matter.
AGs are watching for so-called hidden fees, and AG staff often have first-hand knowledge as they stay in hotels just like other consumers. After Pennsylvania settled with Marriott International, the hotel chain added a new sustainability fee at some of its locations. The AG claimed the hotel had failed to comply with their agreement, which led to a court order and new settlement requiring payment of $225,000 for the alleged previous compliance shortcomings.
What acts did the States find problematic?
In general, the AGs alleged that hotels advertised low base rates to attract consumers away from competitors. Then the hotels later disclosed resort fees, amenity fees, and destination fees when travelers had already begun the booking process. These could range from $9 to $95 per room, per day. States argued failing to disclose all fees up front made it difficult for consumers to compare prices and make informed choices as they booked their stays.
AGs also questioned the purpose of some fees, alleging that hotels made confusing or contradictory claims about what fees actually covered. This included amenities fees for generally complimentary services (like internet access, local and toll-free calls, and access to a fitness center) or resort fees charged by hotels that may not provide resort-like services. States also questioned the practice of including these fees in a general "Taxes and Fees" section, which they alleged could mislead consumers into believing the fees were imposed by the government, not the hotel.
What do these settlement agreements require?
The AG settlements followed common themes requiring:
- The total price is afforded "most prominent display." This means that all mandatory fees are clearly and conspicuously disclosed and that full price, including those add-ons, gets premium billing on booking websites.
- When a consumer sorts by price (e.g. lowest to highest), the "sorting" price includes all mandatory fees. This prohibits hotels from suggesting that a room is less expensive than others if that is not actually the case at check-out.
- Distinguish taxes from fees. The agreements require hotels draw a clear line separating their own fees from government (or quasi government) tax charges.
- The goods and services included in an "amenity" fee are clearly disclosed, before booking.
Businesses can look to these requirements to gain insight on how broadly states may interpret their current consumer protection laws as well as their expectations of businesses in industries beyond lodging. For our next installment on new legislation in this area, be sure to subscribe to the AdLaw Access blog.
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