RESORT FEES AND OTHER IDIOSYNCRASIES OF MEETINGS AT RESORTS…
By Steve Collins
So now we reach the end of the week. On Monday we talked about the differences of holding a meeting at a resort as opposed to a more business oriented hotel. On Wednesday we talked about the relative advantages and disadvantages of meetings in resort destinations. Now it is Friday, and you have decided to “take the plunge” and book your next meeting at a resort. What kind of strange occurrences can you expect in this process?
First off, let’s tackle the hated resort fee—a much maligned (and much misused) fee that has now somehow managed to infiltrate a far broader range of properties than originally intended, and now is common at both resort and non-resort properties. Believe it or not, the original intent of the resort fee was actually a very creative solution to a problem resorts were facing—at least as it was first implemented here in the mountain resorts in Colorado. Due to the extraordinarily high cost of real estate in many mountain resort communities, the cost to build a new hotel property became exorbitant—and far too risky for any single investor. To combat this, many properties were condominiumized—whether they were actual condominiums (with kitchens, etc.) or traditional hotels. In many instances, from outward appearances there is no way to know that the hotel is condominiumized—to you and me they look just like standard hotels, but each room has been sold to an individual owner. This spreads the cost and the risks across a much broader range of investors.
With a condominium property, the owner of each room reaches an agreement with a management company (typically the company that runs all of the hotel operations, from front desk to housekeeping to reservations to common area maintenance, etc.) to rent out his/her room, and the room revenue is split between the management company and the owner. The management company then pays all of its expenses for the actual running of the property out of their share of the split (typically 40%-50% of the room rate, but I have actually seen it as low as 20% that goes to the management company). As more and more amenities (that all cost additional money) became expected, this caused a problem for many of the property management companies that run these condominium properties. Due to their split with the owners, in order to pay for new amenities that might cost, for example, $10 to provide, they would have to raise their room rates by $20 to increase their revenue enough just to break even on that $10 of additional costs (since the owner gets 50% of every dollar of room rate). Hotels could provide this same service simply by raising their rates by $10. This put the condominium properties at a significant disadvantage when competing with traditional hotel properties. Since they had to raise their rates by twice as much as the actual cost to provide the added amenities, their rates soon grew to a level where they were no longer competitive with the hotel properties.
Resort fees were born as a solution to this problem. Since a fee is separate from room rates, the management companies do not have to split this with the owners of the various rooms. This meant that, while hotels had to raise their rates by $10 to provide the additional amenities, the condominium property could keep its rates the same, but institute a $10 resort fee. This way they were able to remain competitive with the hotels both on pricing and amenities. In other words, there ARE actually some justifiable resort fees.
The problem for us as consumers came about when hotels figured out what was going on in the condominium market, and that the general public had basically accepted the premise. Many hotels have seen this as an additional revenue stream, and a way to raise their rates without actually appearing to do so. This bothers me because in a traditional hotel, I have yet to see any justification as to why they should raise their rates via a resort fee (which, quite frequently, is not as clearly disclosed in the booking process) as opposed to simply being up front and actually raising their rates. After all, “free” local phone calls, “free” internet access, “free” newspaper delivery, etc., are all items that are not actually FREE if you have to pay a resort fee to cover those costs. And, of course, since most of us travel with cell phones these days, how many “free” local phone calls do you make from your room anyway--$10 per day worth? I think not…..
One other new fee that I am seeing on an ever increasing basis—at least out here in Colorado—is the “special improvement district” fee. This is a fee that LOOKS just like a sales tax, and shows up on receipts as a separate line item right there with the sales tax, but it is actually a fee on all retail sales within a certain geographic area to provide additional “services” to that area. It shows up in retail shops, restaurants, hotel bills, and anywhere else where sales tax is charged. The dirty little secret of this fee, though, is that it is NOT a tax, and is NOT required by the city, the state, or any other entity with actual taxing authority. In other words, it is just as negotiable as the room rate, even though many hotels try to present it as a tax and non-negotiable. In your negotiation process you may not be able to convince them to remove the Special Improvement District assessment, but you CAN negotiate to have them lower their rates enough to cover the additional cost of this fee.
So there you have it—a week’s worth of discussions on holding meetings in resort locations. On Monday we talked about the differences involved in booking resorts, on Wednesday we talked about the relative advantages and disadvantages of meetings in resort destinations, and today we talked a bit about a couple of the idiosyncratic fees you might encounter when booking a resort. Hopefully this has been helpful to you!