FTC Urges Hotels to Reveal All Fees at Time of Reservation

Hotel Prices Spike, Some Travelers Suspect Price Gouging
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The Federal Trade Commission on Wednesday sent letters to 22 unnamed hotel operators and warned their online reservation sites may violate the law by misrepresenting hotel room reservation prices quoted to consumers.

The warning letters (PDF) cited consumer complaints about "drip pricing" that surfaced at an FTC conference in May. That's a pricing technique in which companies only advertise a product's partial price and reveal other charges as the customer progresses through the buying process.

According to the FTC, "One common complaint consumers raised involved mandatory fees hotels charge for amenities such as newspapers, use of onsite exercise or pool facilities, or Internet access, sometimes referred to as 'resort fees.' These mandatory fees can be as high as $30 per night, a sum that could certainly affect consumer purchasing decisions."

Consumers often didn't know they would be required to pay resort fees in addition to the quoted hotel rate, according to the FTC letter.

"Consumers are entitled to know in advance the total cost of their hotel stays," said Federal Trade Commission Chairman Jon Leibowitz in a release. "So-called 'drip pricing' charges, sometimes portrayed as 'convenience' or 'service' fees, are anything but convenient, and businesses that hide them are doing a huge disservice to American consumers."

The letters strongly encourage hotels to review their websites and ensure their ads do not misrepresent the total price consumers can expect to pay.

Similar to Airline Fee Disclosure Requirements

In August 2011, the Transportation Department instituted new rules requiring airlines to disclose all fees up-front during the booking process. (Read more: US Orders Airlines to State Fees More Clearly)

"Much like airlines showing the full cost for a reservation, hotels identifying all fees at the time of booking will allow consumers to plan the rest of their travel budget," said Henry Harteveldt, travel industry analyst and co-founder of Atmosphere Research Group. "If it makes the consumer smarter, it's a good thing," he said.

FTC spokeswoman Betsy Lordan told the Associated Press the agency wants to give hotels a chance to comply because this is the first time the FTC has publicly stated its position on the issue.

The Associated Press contributed to this report.