How Biden's battle against resort and other 'junk' fees could affect Las Vegas
For decades, travelers have come to Las Vegas ready to spend money.
Visitors head to the ATM to get money for craps and roulette. They buy tickets to concerts and shows. But when they check into their hotels, they’re often met with a less glamorous charge — the resort fee.
Resort fees are an additional charge separate from the listed hotel room rate. Ubiquitous in Las Vegas’ hospitality industry, they range from $23.95 per night at Downtown’s El Cortez Hotel & Casino to a $45 nightly charge at high-end properties such as The Bellagio. They’re intended to cover the amenities and services ranging from in-room Wi-Fi to fitness center and pool access to a daily newspaper, that make a property a resort rather than a standard hotel — at least according to industry representatives.
But consumer advocates say resort fees are a means of tricking customers into paying more after advertising a lower rate. And they’ve found a powerful ally — President Joe Biden.
In his February State of the Union address, Biden announced that his administration would work to crack down on “junk fees,” or hidden fees that crop up at the end of the purchasing process for flights, concert tickets and hotels.
"I know how unfair it feels when a company overcharges you and gets away with it,” Biden said. “Not anymore."
Since then, the war on junk fees has become a centerpiece of the president’s and Democrats’ political agenda. They’re banking on the issue being an electoral hit, believing junk fees to be universally unpopular. And the release of a proposed Federal Trade Commission (FTC) rule in October would give the effort teeth, creating a legal standard in which full prices must be displayed up front and additional fees must be legitimate.
The industry backlash has been swift. Trade associations have met the FTC’s proposed rule with lobbying fire of their own — major players such as the American Gaming Association and the American Hotel and Lodging Association are seeking to carve hospitality out of its enforcement range, claiming there is already sufficient regulation on their industry.
Caught in the middle are members of Congress representing Las Vegas — all Democrats supportive of Biden’s efforts to lower costs but frequent allies of the gaming and hospitality industries. As representatives of Nevada, they are accountable to Las Vegas resort workers and companies more so than tourists visiting their districts. And while other Democrats in Congress have been vocal on the issue, and states such as Massachusetts and California attempt to eliminate junk fees, Nevada and its delegation have been noticeably more muted.
“Las Vegas resorts offer something special,” Rep. Dina Titus (D-NV), who represents the Strip, said, when asked in an interview about the proposed FTC rule. “They've been doing it for a long time. It's not like it’s something new.”
Consumer advocates say hotels take advantage of resort fees to make their prices look lower than they actually are, preventing consumers from accurately comparing prices. Many countries have banned resort fees.
“Resort fees exist so that a hotel can lie about the advertised rate and so that they can cut third-party bookers out of commission,” said Lauren Wolfe, the chief legal officer of advocacy group Travelers United, which focuses on consumer issues that affect travelers. “They don't actually pay for services.”
In a 2017 FTC economic report analyzing resort fees, the agency found that use of resort fees without a mandatory upfront disclosure was likely to “harm consumers by increasing the search costs and cognitive costs of finding and choosing hotel accommodations.”
“When it becomes more costly to search and evaluate an additional hotel, a consumer’s choice is either to incur higher total search and cognitive costs or to make an incomplete, less informed decision that may result in a more costly room, or both,” the report stated.
So long as advertised room rates are not required to include the fee, companies are incentivized to offer them.The FTC report cited a case study of Caesars Entertainment, which spent years marketing its lack of resort fees while other Strip competitors adopted them, only to reverse course in 2013 amid what it called customer demand to bundlepackage amenities fees.
“This situation suggests a ‘Prisoner’s Dilemma’ style game where the efficient outcome cannot be achieved because any hotel offering a better deal without a resort fee will lose business to competitors charging separate resort fees and lower advertised room rates,” the agency concluded.
Wolfe cited customers still having to pay resort fees when staying at properties during the pandemic, when the amenities the fees ostensibly cover, such as a pool, were not available.
“There are millions of people going to Vegas who have no idea what a resort fee is,” she said. “Those people are actively being taken advantage of by these giant hotel casinos.”
The FTC’s proposed rule would ban fees that are hidden or “bogus,” which the agency defines as misrepresenting their purpose. The FTC rule includes a section on the short-term lodging industry, saying “drip pricing” — or not showing the full cost until consumers have already clicked through several pages on their way to payment — is misleading and anticompetitive. The agency estimates that consumers pay $2.93 billion in resort fees annually, and the fees are, on average, 11 percent of the cost of a room.
The agency says the rule would save consumers time by making hotels disclose the total cost up front, easing the process of comparing rates, and saving money by reducing “deadweight loss,” or costs incurred by market inefficiencies.
The American Hotel and Lodging Association reports that 6 percent of hotel firms impose resort fees. Using that figure, the FTC calculates that legal compliance and upfront pricing could cost hotel companies between $330 million and about $1 billion over the next 10 years.
The gaming and hotel associations, unsurprisingly, disagree on the merits. American Gaming Association CEO Bill Miller sent a February letter to the FTC immediately after the State of the Union arguing that resort fees provide for the amenities that distinguish resorts from mere hotels — among them wireless internet access, shuttle services, pool towels and expedited entry into nightclubs. He argued that the fees are already disclosed, citing the Wynn Resort’s booking page as an example, where a notice that a $45 resort fee, plus tax, will be added per night, detailing the included amenities.
This transparency varies by hotel. When booking a room online at Caesars Palace, for example, users have to click a drop-down button on the rate page to see the resort fee. Hard Rock International’s The Mirage flags that the advertised average nightly rate “excludes taxes and fees,” and the resort fee is not added into the total cost until a room is added to a user’s virtual shopping cart.
Alex Costello, the vice president of government relations at the gaming association, said the separate resort fee pricing structure gives customers more choice.
“It actually allows a lot more transparency for customers to be able to say, ‘OK, I'm paying this fee, but I don't care about valet service or free Wi-Fi or a spa access or concierge or any of the number of things that are usually included in a resort fee,’” she said. “And that allows them to make a choice based off of their personal preferences to say, ‘You know, it's not worth it to me to pay this fee. I'm going to take my money and my business elsewhere.’”
Costello said she fears the rule as written is too broad. By banning fees that are misleading based on their lack of value (a standard she said is somewhat ambiguous), it will be difficult for companies to know if they are in compliance. She said industry members would prefer a legislative approach from Congress that creates a national standard rather than setting a regulatory floor that certain states can — and already are — raising.
She added that if the rule is finalized, association members will work to follow it — and said she hopes the FTC ensures online travel agencies do as well.
In that telling, the travel agencies — the middlemen in hotel bookings — misrepresent costs. Like the hotel firms themselves, advertising the full price depends on the company.
Between the FTC rule and state efforts to curb junk fees, the writing may be on the wall for resort fees. California recently passed a law requiring upfront pricing, which goes into effect in July. A lawsuit from the state of Pennsylvania against Marriott ended in a settlement that required the company to list total prices up front. And Massachusetts’ attorney general is proposing her own rule that mandates sellers display the total price of goods and services prominently and disclose if any fees are optional or refundable.
The Massachusetts law also permits consumers to bring class action lawsuits against hotel chains over resort fees, according to Bart Naylor, a financial analyst at Public Citizen, a national consumer rights advocacy organization.
“The resorts, knowing that there could be a class action lawsuit, won't do it in the first place,” Naylor said. “I’m sure that would make a major impact in Nevada.”
Given that many of the major hospitality companies operate in multiple states, and difficulties in separating digital pricing models in one state versus another, all-in pricing might be the future for the industry.
Awkward spot for the delegation
Democrats in the Nevada congressional delegation agreed that junk fees — particularly in other industries — are a problem. But the gaming and hospitality industries remain the biggest employers in their districts, and major campaign funders for both parties.
In the House, Democrats from eight states and the District of Columbia have co-sponsored the Biden-backed Junk Fee Prevention Act, but no Nevadans have signed on. Sens. Amy Klobuchar (D-MN) and Jerry Moran (R-KS), the co-chairs of the Senate Travel and Tourism Caucus, have a bill explicitly focused on fee transparency in the hotel sector, but neither Nevada senator has joined the effort.
In Nevada, the delegation must navigate wanting to support the state’s economic engines and the president’s efforts to cut costs.
Las Vegas resorts, Titus has said, are actual resorts and thus should be treated differently than standard hotels. But she said the FTC’s focus on ensuring customers know about the fees is valid.
“Transparency is the key,” she said.
Sen. Catherine Cortez Masto (D-NV) said she “likes the idea” of addressing junk fees but needs to study the FTC’s language more closely. When asked if the president’s effort to take on resort fees puts her in an awkward position, she demurred but agreed with Titus that she’s behind the idea to make them more transparent.
“A lot of these are hidden, and I don’t support hidden fees at all,” she said.
Sen. Jacky Rosen (D-NV)’s staff did not make her available for an interview on resort fees.
One major player — and Democratic kingmaker — that hasn’t weighed in: organized labor. The Culinary Workers’ Union Local 226, which represents workers in the hospitality industry and is among the most influential forces in Nevada Democratic politics, has declined to weigh in on the proposed FTC rule.
Wolfe said she’s heard from union representatives in other states that resort fees can suppress tipping. If customers are unaware of resort fees and then learn they have to pay them on site, they take their frustrations out on workers, equating the cost with a service fee instead, she said.
She said the reluctance of Nevada’s public officials to lead the crusade against resort fees mirrors the behavior of Democrats in New York, where the hotel industry is a major political player. But she said that there is enough bipartisan interest in curbing the practice from states where the hospitality industry is less powerful, and enough legal momentum, that she expects major pricing changes soon.
“[The] states that have taken this issue on — like Washington, D.C., Nebraska, Texas, Pennsylvania — those are not the states that are having massive problems with deceptive fees at hotels,” Wolfe said.