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- Mar 7, 2000
A Summer of Surcharges
Opinion · August 1, 2002
After Brad Power clicked the "buy" button on the American Airlines Web site recently, the price of his airline ticket took off. The carrier suddenly wanted $50 more for his flight.
Funny airline math? No. Power was using his airline miles to pay for the ticket, so American added an expedite fee because he made a reservation less than 21 days in advance. "The fee was snuck in after I approved my purchase," he claims. "If I go to an ATM, they ask me before they charge a $1 transaction fee when I get cash. Why can't American do that?"
This is shaping up to be a summer of surcharges. Just about every part of the ailing travel industry, from car rental companies to cruise lines, is lowering prices but adding creative fees to in order to make up the difference.
Charging travelers over and above the agreed-upon rate isn't unusual. But this summer's fee frenzy is significant in that the number of extra charges has never been higher while the disclosure of these extras has never been worse. The result: Travelers such as Power are ticked off.
American Airlines spokesman Tim Kincaid said the fee covers the cost of the transaction and expenses "associated with developing the technology for electronic tickets and other enhancements," but he agreed that the carrier's disclosure was inadequate. "We are in the process of revising award expedite fee information on AA.com," he told me.
Not all surcharge stories have a happy ending. When Louise Andrew bought a book of EasyPAK tickets on Alaska Airlines recently, and tried to get a paper receipt for one of the portions, the airline demanded $20. Asked about the surcharge, an Alaska Airlines representative said the carrier sees "no reason" to offer additional receipts - unless someone is willing to pay for them.
It isn't just the airlines that are having disclosure problems. Heather Flynn, a Galveston, Texas, college administrator, remembers a Carnival Cruise. to Mexico she recently took with her husband. "At lunch on the Lido deck, we were handed a rum punch," she says. "Only after I had it in my hand was I asked to sign for it."
Surchages are everywhere you turn. Hotels tack on fees for the use of a phone, swimming pool or coffee maker. Car rental companies bill you for the cost of your tags, for operating an airport van, and even to cover other customers' parking tickets. No one that I know of tracks all the surcharges, but the anecdotal evidence suggests these fees are fast becoming a favorite way for travel companies to generate extra revenues.
Many of the fees are nonsense. For example, most major airlines still impose a fuel surcharge of up to $40 on tickets - a remnant of the soaring petroleum prices of two years ago - even though jet fuel prices have since dropped. Only a few carriers have admitted that they intend to keep the fuel surcharge to offset other expenses; most don't talk about it in the hopes that no one will notice the add-ons.
Why all these fees right now? Robert Mandelbaum, a hospitality industry analyst for PKF Consulting in Atlanta, says travel earnings are falling and firms are looking for new revenue sources.
Earlier this month, the major airlines, such as American, Delta and Northwest, all reported continued losses in the second quarter. The major air carriers lost $2.4 billion in the first quarter of this year. Overall hotel profits also plummeted 27% last year to $16.8 billion, according to PriceWaterhouseCoopers. Every penny counts now.
Mandelbaum estimated that the average hotel will make 2.2% of its total revenue on guest use of telephones. "The surcharges used to be like found money," he says. "Now they're counting on them."
To be sure, some of these fees are justified. A hotel, for instance, has every right to bill guests for long-distance phone calls. Car rental companies should be allowed to cover their expenses, including the costs of operating at an airport. And even though cruise ships may bill themselves as "all-inclusive" experiences, no one is expecting them to offer an open bar to passengers.
Most travelers have no argument with a reasonable charge. It's the lack of clear, upfront disclosure that vexes them.
By surprising guests with these fees, the companies may make more money in the short term. But they risk damaging their relationship with their customers in the long term, a result that could hurt these businesses even more. The most recent example of this backlash: hotel chains that imposed an "energy surcharge" during last year's energy crisis in California - in properties thousands of miles away from the Golden State. Many guests took their business elsewhere in disgust, or didn't travel at all, which only deepened the lodging industry's current troubles.
A solution probably isn't up to the industry, but government. The Department of Transportation and the Federal Trade Commission, which regulate most of the travel businesses in question, already have broad rules prohibiting unfair or deceptive practices. Maybe it's time to take a page from the Food and Drug Administration's rulebook. Under the Nutrition Labeling and Education Act passed in 1990, most food manufacturers must disclose the ingredients in their products. Why not do the same for travel?
Opinion · August 1, 2002
After Brad Power clicked the "buy" button on the American Airlines Web site recently, the price of his airline ticket took off. The carrier suddenly wanted $50 more for his flight.
Funny airline math? No. Power was using his airline miles to pay for the ticket, so American added an expedite fee because he made a reservation less than 21 days in advance. "The fee was snuck in after I approved my purchase," he claims. "If I go to an ATM, they ask me before they charge a $1 transaction fee when I get cash. Why can't American do that?"
This is shaping up to be a summer of surcharges. Just about every part of the ailing travel industry, from car rental companies to cruise lines, is lowering prices but adding creative fees to in order to make up the difference.
Charging travelers over and above the agreed-upon rate isn't unusual. But this summer's fee frenzy is significant in that the number of extra charges has never been higher while the disclosure of these extras has never been worse. The result: Travelers such as Power are ticked off.
American Airlines spokesman Tim Kincaid said the fee covers the cost of the transaction and expenses "associated with developing the technology for electronic tickets and other enhancements," but he agreed that the carrier's disclosure was inadequate. "We are in the process of revising award expedite fee information on AA.com," he told me.
Not all surcharge stories have a happy ending. When Louise Andrew bought a book of EasyPAK tickets on Alaska Airlines recently, and tried to get a paper receipt for one of the portions, the airline demanded $20. Asked about the surcharge, an Alaska Airlines representative said the carrier sees "no reason" to offer additional receipts - unless someone is willing to pay for them.
It isn't just the airlines that are having disclosure problems. Heather Flynn, a Galveston, Texas, college administrator, remembers a Carnival Cruise. to Mexico she recently took with her husband. "At lunch on the Lido deck, we were handed a rum punch," she says. "Only after I had it in my hand was I asked to sign for it."
Surchages are everywhere you turn. Hotels tack on fees for the use of a phone, swimming pool or coffee maker. Car rental companies bill you for the cost of your tags, for operating an airport van, and even to cover other customers' parking tickets. No one that I know of tracks all the surcharges, but the anecdotal evidence suggests these fees are fast becoming a favorite way for travel companies to generate extra revenues.
Many of the fees are nonsense. For example, most major airlines still impose a fuel surcharge of up to $40 on tickets - a remnant of the soaring petroleum prices of two years ago - even though jet fuel prices have since dropped. Only a few carriers have admitted that they intend to keep the fuel surcharge to offset other expenses; most don't talk about it in the hopes that no one will notice the add-ons.
Why all these fees right now? Robert Mandelbaum, a hospitality industry analyst for PKF Consulting in Atlanta, says travel earnings are falling and firms are looking for new revenue sources.
Earlier this month, the major airlines, such as American, Delta and Northwest, all reported continued losses in the second quarter. The major air carriers lost $2.4 billion in the first quarter of this year. Overall hotel profits also plummeted 27% last year to $16.8 billion, according to PriceWaterhouseCoopers. Every penny counts now.
Mandelbaum estimated that the average hotel will make 2.2% of its total revenue on guest use of telephones. "The surcharges used to be like found money," he says. "Now they're counting on them."
To be sure, some of these fees are justified. A hotel, for instance, has every right to bill guests for long-distance phone calls. Car rental companies should be allowed to cover their expenses, including the costs of operating at an airport. And even though cruise ships may bill themselves as "all-inclusive" experiences, no one is expecting them to offer an open bar to passengers.
Most travelers have no argument with a reasonable charge. It's the lack of clear, upfront disclosure that vexes them.
By surprising guests with these fees, the companies may make more money in the short term. But they risk damaging their relationship with their customers in the long term, a result that could hurt these businesses even more. The most recent example of this backlash: hotel chains that imposed an "energy surcharge" during last year's energy crisis in California - in properties thousands of miles away from the Golden State. Many guests took their business elsewhere in disgust, or didn't travel at all, which only deepened the lodging industry's current troubles.
A solution probably isn't up to the industry, but government. The Department of Transportation and the Federal Trade Commission, which regulate most of the travel businesses in question, already have broad rules prohibiting unfair or deceptive practices. Maybe it's time to take a page from the Food and Drug Administration's rulebook. Under the Nutrition Labeling and Education Act passed in 1990, most food manufacturers must disclose the ingredients in their products. Why not do the same for travel?
