The resort fee dam is breaking.
California Gov. Gavin Newsom has signed a new law, SB 478, that reins in the practice of slipping extra fees into travelers’ bills.
While some media coverage has portrayed the act as a “ban” on resort fees, the measure actually just enforces disclosure of the fees at all stages of a transaction.
Now, any business, whether it deals in travel, concert tickets, or anything else, will be forced to calculate the entire price, including fees, from the moment shopping searches start. Only taxes and government fees may be omitted initially.
With this change, hotels will no longer be able to game their positions in online search results of third-party booking engines by pretending to offer cheaper rooms than are actually available. The law should also quash the recent divisive trend of some California restaurants tacking on a “healthcare fee” that essentially protests legal requirements to fund employee benefits.
The new law, which takes effect on July 1, 2024, “make[s] unlawful advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges other than taxes or fees imposed by a government on the transaction.” If a fee is not optional and cannot be removed from a bill, the fee has to be disclosed from the top.
The law clearly classifies these extra charges, including resort fees and their pernicious cousins the urban fee and the destination fee, as subject to California’s already-existing Unfair Competition Law and the state’s False Advertising Law.
This act (read the text here) states that it is “intended to specifically prohibit drip pricing, which involves advertising a price that is less than the actual price that a consumer will have to pay for a good or service.”
“California sent a clear message today: The days of bait-and-switch pricing practices are over,” California State Senator Nancy Skinner said in a statement. “With Gov. Newsom’s signing of SB 478, Californians will know up front how much they’re being asked to pay, and no longer be surprised by hidden junk fees when buying a concert or sports ticket or booking hotel rooms for their family vacation.”
Earlier this year, Hyatt and Marriott both moved to include their extra fees in immediate search results. This law will spread that practice industrywide and standardize the expectations.
According to the Consumer Financial Protection Bureau, consumers in the United States pay an extra $29 billion in junk fees each year.
Although it’s great news that travel sellers in California can no longer get away with making their products seem less expensive than they actually are, we could argue that California hasn’t gone far enough.
The state is only banning the practice of hiding fees, not the act of charging them. Because resort fees are often taxed at different rates than the base hotel rate, there’s plenty of space to argue that drip pricing is often abused as a tax dodge and shouldn’t exist at all.
Resort fees are banned outright in many countries, including throughout Europe. International visitors to the United States are often repelled by the practice.
But faced with lobbying from the hospitality industry—Airbnb tried to argue, unsuccessfully, that California’s new law should only apply to Californians, not customers from out of state—politicians tend to lose their will when asked to ban extra fees outright.
Although California’s rules only affect products sold in California, similar regulations are being pursued at a national level. Supported by President Joe Biden, U.S. senators have introduced the Junk Fee Prevention Act, but so far Congress has not been functional enough to pass the bill and protect consumers on a nationwide basis.
This week’s move by California—one of the most powerful tourism destinations in the world—will hopefully be a bellwether, suggesting better regulation of extra fees in the other 49 American states is coming soon.
We say these mandatory fees should simply be banned and all expenses should be folded into the base price and taxed at the same rate. But if that’s not possible given American politicians’ donations-softened backbones, then exposing these fees from the start is a fair second-best tactic.
We’d also love to see taxes folded into prices, but that might be a little too much like Europe for many Americans’ tastes.