Who doesn’t hate those pesky fees upon check-out: Sometimes as high as $45 +7% tax?
Well, it is hard to believe, but they are actually good for us travelers.
What? How? Why?
In order to explain that, I first need to tell you how resorts earn their money.
A lot of resort are increasingly dependant on sites like Booking.com or Expedia.com. These companies don’t work for free either. They usually get paid a percentage of the travel sum.
So for example: You book 4 nights (with flight) to Las Vegas. You buy a $1.000 package via Expedia (for calculation purposes). The breakdown flight/hotel for this is roughly 50-50.
The airliner should get 500, they pay a set fee (Usually a percentage between 1 & 2%), so they have to give Expedia between $5 & $10.
These percentages are tiered. That means: the more tickets you sell for the airline, the higher the percentage you get. You can bet your sweet bippy that Expedia is in the highest tier. They might get as much as 8 or maybe even 10%.
For hotels it is just the same. The only difference is: There are much more hotels than there are airlines. So the competition is fierce! Hotels also pay a kickback to the booking agency/website. The only difference is: The first tier is MUCH higher. Hotels will pay as high as 8% to agencies. The larger booking platforms are in the highest tier and can be as high as 20%.
BUT (and here is the catch…) These charges only apply to the actual roomrates. Any fees, charged by and payable to the hotel are not subject to these kickbacks.
As you can understand: Hotels are not paying these fees out of there own pockets. They include these kickbacks in their roomrates AND not in their resortfees, because they do not have to pay any kickback over the resortfees.
Imagine that hotels do NOT charge any resort fees.
The resort charges you $100 for a room for 1 night via Expedia. They have to pay 20% kickback to Expedia, so the resorts make $80 after costs.
Room rate: $100
Resort fees: $0
Expedia gets $20
Total income hotel: $80 (Room rate +resort fee – kickback)
Total out of your pocket: $100 (Room rate + resort fee)
If they charge just $50 via Expedia and charge $50 in resort fees, the room cost you the exact same. $50 + $50 = $100. Expedia gets 20% of $50, so they earn $10, the hotel gets: $50 – $10 = $40 and they get $50 in resort fee, so they earn $90 in total ($40 + $50 = $90).
As explained earlier: There is a LOT of competition between hotels. They have to keep their rates as low as possible. So in the example earlier: They make more money if they lower their roomrates and increase their resort fees.
What if hotels charge resort fee?
In the first example (no resort fees at all) the hotel makes $80. If the hotel still wants to earn $80, but still want to be competitive and decide to charge $50 in resort fee, they still need to nett $30 after kickbacks to (for example Expedia). If they need to pay 20%, they can set the room rate at $37.50 (+$50 resort fee). In total you pay $87.50 in total, per night, room rate ($37.50) + resort fees $50 = $87.50.
Room rate: $37.50
Resort fees: $50
Expedia gets: $7.50
Total income hotel: $80 (Room rate + resort fee – kickback)
Total out of your pocket: $87.50 (Room rate + resort fee)
If the hotel charges resort fees you pay $87.50. If the hotel decides to charge no resort fee at all, the same room will cost you $100 and in both cases the hotel earns $80.
So in order to stay competitive with other resorts, hotels just drive up the resort fees, so they have to pay less in kickback, which ultimately benefits us, the traveler.
Who makes up the difference?
The middlemen such as Expedia gets less. So resort fees are actually good for us travelers! Think about that next time you check your creditcard statement after your trip. It is NOT a sleazy way of hotels to squeeze some extra bucks out of you! You actually saved money.
