New ZealandTourism

Is the end of ‘surprise’ airline and hotel fees good or bad for the travel industry?

“Focus instead on where you can add value to the customer’s trip” is consensus view from experts for airlines and hotels following new potential rule set to challenge ‘surprise’ and ‘resort’ fees

Recently two US senators introduced the Junk Fee Prevention Act, specifically targeting airline and hotel resort fees. This will require airlines and hotels to display their full prices upfront and stop ‘surprise’ fees. 

For hotels, this could be ‘resort fees’ added at the end of the stay, or for airlines it could extend to fees that parents have been forced to pay to be seated next to their children. 

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Meanwhile, consumer awareness groups have been highlighting this problem and asking for change elsewhere for years, for example around the inclusion of local hotel taxes only upon arrival. And in the UK the Department for Business and Trade has also opened an investigation into price transparency relating to air fares and other transport such as trains.

The fees of course are unpopular with travellers, but what does the industry think about surprise fees and the new ruling? And how would such changes be introduced into the B2B distribution and sales & marketing processes?

Digitrips, the owner of leading French multi-product travel platform MisterFly, feels transparency is key. Managing Director Emilie Dumont comments,“since the inception of our first website in 2016, we have always considered transparency as a key differentiation factor and the price displayed on our search result is the price you pay! It has proved to be a good strategy, enhancing trust with our customers. Our industry is still in a period of building back people’s trust in travel, so any fear of extra charges is just one more reason people might lose confidence. From a technology perspective, we can implement these in the booking display relatively easily, as long as the information is normalized.”

“Resort fees are a short-term solution to increasing revenues when times are tough,” added the tech-driven global travel distribution provider Didatravel, who thinks hotels and airlines could be losing out on income in the longer term by charging surprise fees.  “While they may add to revenues-per-traveller in the immediate term, they don’t do anything to build long-term loyalty and therefore repeat business.  Guests may have had otherwise enjoyable stays, but a sting at check-out is likely to leave a bad taste not just with that guest but with anyone who reads that guest’s review.”

Hotel revenue management expert BEONx says there are more effective ways of pricing optimisation. Chief Marketing & Innovation offices Alex Barros comments that “unexpected fees are never a good tactic for raising relatively small sums in relation to the overall cost of the stay. Instead, hotels are better off focusing on technologies that can help them price competitively and adjust their rates according to real-time influencing factors – or better still use technology solutions that cross-sell the guest additional services that they value and are profitable for you, such as a transfer or in-destination experience, your F&B, or even just a room upgrade for a modest fee.”

Janis Dzenis from Price comparison website WayAway comments that “transparency is the key indeed and tricks like hidden fees, we don’t like it either. ‘What you see is what you pay’ has been our main rule from the beginning. However, aviation fares are a complex structure. We pay less for air travel because modern companies offer ‘unbundled ancillaries’ with separate fees for everything other than the plane seat. Consider things like extra luggage, food, airport fast track and other amenities. Not everyone needs those and hence you can customize your travel experience using this a la carte model. But should the fee structure be transparent and crystal clear to customers? Hell yes!”  

Also considering the potential benefits of unbundling, Katie Crowe from travel insurer battleface states that “of course, transparency on pricing and clarity on what you are buying should always be on offer. Specifically, airlines should prioritise offering travellers products based on their actual demographic and trip itineraries, instead of bombarding them with irrelevant products in what can often be a complex purchase path.  In fact, such personalisation and unbundling of products will enhance customer engagement and help passengers feel more connected to the airline and what they are buying is actually relevant for their needs.  Any regulation that results in decreased choice or forces carriers to include as ‘free’ services which they are currently charging for will only lead to price increases for everyone.” 

As a final thought, Morgann Lesné from travel investment banking group Cambon Partners offers a different perspective: “Investors are looking for companies that have a solid customer base, and trust is a major part of that. Untransparent pricing is an easy way to lose trust and credibility, so the upcoming ruling may help travel suppliers in the longer term, forcing them to build trust with their customers and look to more popular, wholesome ways to add incremental revenue.”

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