Ms. Horwell

Social Media & PR

Taking the Sting Out of Fees and Surcharges

By Vanessa Horwell, Founder & Chief Visibility Officer, ThinkInk & TravelInk'd

Due to the recession-driven deep discounting tactics practiced over the past few years, hotels are scrambling to implement revenue management strategies that focus on new ancillary revenues. While such strategies have proven to be effective, they also have a tendency, if not implemented through smart tactics, to be met with guest revolt. All too often, guests feel “nickel and dimed” by added fees, surcharges and gratuities unceremoniously added to their bill at checkout time.

In order to avoid losing guests—thus losing the increased revenue that these fees and service charges were designed to create—you, the hotelier, must find ways to introduce the new fees and surcharges to guests in a way that will make them more palatable.

This article will examine several common types of fees and surcharges and will provide tactical recommendations on how to introduce them to guests without causing upset or losing out on future bookings.

Gratuity & Service Fees

These service fees go toward covering the costs of staff, from bellhops, to valets, to housekeeping personnel.

Guests’ feelings toward gratuity fees can be both positive and negative; while these fees are generally more acceptable to customers because they assume that the fee is passed along directly to the hotel’s employees (not just into “corporate coffers”), guests also feel that gratuity fees should be performance-based. By making these fees mandatory, guests who feel that service was not up to par will be unhappy. Of course, if service is below average, then the guest has a legitimate complaint, and management, regardless of its ancillary fee structure, should address the underlying issue of poor service.

Tactics:
First and foremost, if the hotel services are mandatorily charged, then those services better be worth it. Nothing takes a guest from a state of mild irritation due to poor service to a state of utter hostility faster than being charged for such poor service. Make sure that the services being provided for by the fees are beyond ordinary. Small details such as name recognition by staff will go a long way in making the guest feel that the hotel is going the extra mile in providing superior, fee-justified services.

Another way to combat guest revolt from gratuity fees is to make guests aware of the value of the service. For example, hotel and in-room signage should provide the guest with proof of value: “Your Room is Kept Clean Through Your Service Fee: No Gratuity Required.” This will also prevent guests from double-tipping, leaving cash in the room and then paying the mandatory fees upon checkout, which can be another source of strife.

Signage can also help increase awareness by pointing out unique benefits provided for by the gratuity fees. In addition, if your gratuity fees give your guests something they won’t get from the competition, point it out to them. If you are implementing gratuity fees, make sure that your staff is under strict orders to turn down person-to-person gratuities. Another effective tactic is to have staff members point out (at the critical moment—that moment when the tip is forthcoming) that gratuity is already provided for by the service fee. Such actions build credibility in the guest’s eyes, making them more amenable to paying the fee at checkout.

Surcharges

Most of the items available for surcharging today have become ingrained in the mind of hotel guests as free amenities. As a result, charging fees for in-room safes, coffee makers, local phone service, etc.—easy targets for surcharges—will more than likely result in customer push back.

Tactics.
The best strategy for easing customers into surcharges is to offer them alternatives: either a room without the surcharged items or removal of the items from the room (and the charge from the bill). Failure to give these options often leads to customer frustration and loss of business.

One more note on surcharges as a revenue management strategy: it is of utmost importance to clearly outline what is being surcharged prior to guest check-in. Failure to do so could be construed as an unethical bait-and-switch tactic, poor business practice or even illegal and will guarantee your property a negative review.

Take for example the resulting legal backlash against hotels that were accused of surreptitiously levying “energy” surcharges on customers in the last decade. Because they did not notify customers prior to charging for an energy surcharge, hotels, including Marriott International, Starwood Hotels & Resorts, Hilton Hotels Corp. and Hyatt, settled outside of court in a deal that made them potentially liable for more than $60 million in future discounts. According to Reuters at the time:

“While hotels said the charges were justified, they came under fire for failing to notify customers in advance of the fee, effectively quoting them one rate and charging another, critics said.”

While surcharges for an in-room coffee maker seems a far cry from an energy surcharge, the concept is similar; therefore, hotels implementing surcharges need to be mindful of notifying the guest in advance as to the total amount which will be charged to them each day, prior to booking.

Resort Fees

Resort Fees are becoming an extremely popular way of combining individual services in one convenient daily fee. Unfortunately, resort fees are also extremely unpopular with guests. A quick Google search for “resort fees” reveals an uprising of disgruntled guests through blog posts and article quotes, demonstrating that resort fees are a surefire way to upset and alienate your guests. If you’re planning on adding resort fees, construct your strategy based on fee convenience and value.

Tactics.
Emphasize the value of bundling together all of the services being offered for one low price. Taking a page from the strategy for gratuity fees, use printed materials to validate the extra cost and justify the value of the benefits being offered. This will be beneficial because many guests incorrectly assume that resort fees are simply a fee that actually provide no benefit and which doesn’t help cover anything more than a hotel looking to make more money.

At check-in, give the customer a card or flyer that itemizes all of the services given from the resort fee. Make sure to point out actual costs: itemize the full “retail” value of each of the services combined in one dramatically lower fee.

Another good tactic is to tie in a complimentary offering along with the resort fee, such as one free daily beverage at the hotel’s restaurant or bar. This has the benefit of attracting more spending, as guests will often buy more after taking advantage of a complimentary offering.

Usage Fees

Generally accepted and widespread in practice, usage fees can be charged for anything from daily WiFi service to airport shuttle and ground transportation. Usage fees are implemented mainly for those items or services that the guest has an option of choosing to use. The difference between usage fees and surcharges is that the usage fee is wholly enacted by the guest and is rarely tied to a physical product (an example of an exception to this would be items from a mini bar).

Tactics.
Because the items that usage fees are tied to have become accepted as “chargeable” items in the guest’s eyes, there is little need for any special tactics; however, usage fees exist even in today’s heavy-discounting environment and have not historically proven to be an effective ancillary revenue stream. Therefore, if you’re looking to find revenue from usage fees, it will probably be more effective to bundle several usage charge items and services into a one-time fee. If so, the result will essentially be a resort fee.

In conclusion

While there are no guaranteed ways to ease guests into your new ancillary revenue strategy, there are tactics that can help acclimate them into new service charges and fees, minimizing the possible risk for pushback and negative reviews after the fact. Primarily by educating guests and keeping them aware of the value given by such fees, you, the hotelier, can take the “sting” out of new revenue channels and keep your guests coming back for more.

Sources/References/Notes

http://www.allbusiness.com/transportation-communications-electric-gas/4220035-1.html

Chief Visibility Offer, ThinkInk & TravelInk’d Vanessa Horwell is the founder and Chief Visibility Officer of ThinkInk & TravelInk’d, a public relations and visibility firm that shuns press releases in favor of storytelling. She has spent the past 18 years working with companies in the US, UK and Europe, developing successful campaigns and strategies for their brands. Ms. Horwell is a senior level strategist who works with companies in North America, EMEA and Asia-Pac in developing winning media campaigns, building relationships with influencers, and improving visibility through a unique style of public relations. Ms. Horwell can be contacted at 305-749-5342 or vanessa@thinkinkpr.com Extended Bio...

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