False hotel advertising continues while the FTC watches
When a hotel advertises that the nightly room rate is $120 and then insists on collecting $150 a night, consumers can claim that they were a victim of false hotel advertising. According to a Federal Trade Commission (FTC) study, consumers are harmed by the practice. Yet, this false advertising continues every day while the FTC turns a blind eye. Our government advertising watchdog sleeps while hotels take advantage of deceptive and misleading ads.
For years, consumers have been plagued with the issue of mandatory resort fees. Once upon a time, guests who checked their bills were able to refuse payment. However, with an FTC that has chosen to look the other way for years, hotels have had a field day with the truth and harmed America’s consumers.
In the introduction to the FTC Economic Study, researchers note that the current system harms consumers.
This analysis finds that separating mandatory resort fees from posted room rates without first disclosing the total price is likely to harm consumers by increasing the search costs and cognitive costs of finding and choosing hotel accommodations. In this situation, 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 analysis finds that separating resort fees from the room rate without first disclosing the total price is unlikely to result in benefits that offset the likely harm to consumers.
According to the FTC study, hotels can solve this problem by including the mandatory resort fees in the room rates or by making the resort fees optional. Both would serve the purpose of making the advertising honest.
Hotels could eliminate these costs to consumers by including the resort fee in the advertised price. They could still bundle the same resort services with the room and charge the same total price. They could also list the components of the total price separately, as long as the total price is the most prominently disclosed price. Hotels would also have the option, as they do now, of changing to unbundled, optional resort services, which would not be included in the advertised price.
What more does the FTC need? It is not difficult to ascertain that when a hotel advertises that the room rate is one price and then requires a consumer to pay more, sometimes twice as much, the advertising is false. Plus, the new and damning FTC economic study makes it clear that consumers are harmed by this deception. It is almost impossible to believe that the theoretically consumer-friendly Obama FTC has refused to take action to stop this blatant false hotel advertising.
Hopefully, the incoming Trump administration, ironically led by a president who used to own and manage a major hotel chain, will have the fortitude to stop this deceptive and dishonest hotel practice. Perhaps, a president who has no need for fundraising support from hotel and gaming association members will be able to recognize basic dishonesty.
Already, we know that the Trump hotels do not charge resort fees at any property except their Las Vegas hotel. There, it is economic suicide to refrain from charging resort fees. In Las Vegas, honest hotels appear to cost more than hotels that charge mandatory fees not included in the advertised room rates.
A simple statement from President Trump that the jig is up will bring hotels across the country in line and eliminate this false advertising. The incoming president doesn’t need to study this issue for five years; he already understands the insidious practice is dishonest and that allowing it to continue allows bad advertising to drive honest advertising out of the market.