Why Hotels Charge Resort Fees & Overall Cost Over Time
As a local, every once in awhile I log into my Mlife account and check out room rates. Some times I make a staycation out of a cheap rate for Hyatt credit and at the end of the year I have also done a mattress run or two to get Hyatt nights. Thankfully with the new Hyatt credit card that shouldn’t be necessary because I can spend my way to earn extra nights.
Resort Fee Double the Room Rate?
This morning I was just looking at the Mlife site for fun and noticed something interesting. Look at the price for Excalibur and notice the resort fee price below.
That’s right! The room rate is less than half of the resort fee. I’ll tell you why a little later, but for now let’s look at how Mlife’s increase in resort fees has affected the overall cost of a room.
While many people including myself hate resort fees there is one way to make sure you are getting the best deal. Simply calculate your overall cost. When I saw this number, it got me curious as to how much overall rates at Excalibur have increased. It’s pretty interesting and surprising.
Comparing Three Stays Over Time
Back in December, 2015 I “stayed” at the Excalibur in order to gain Hyatt credit for then Diamond status. Here are the numbers relating to that stay. I should note that the $21.75 room rate is the LOWEST I had seen all year for the property. I’m not sure if the $16.49 is the lowest all year as of now, but it can’t get much lower.
As you can see my overall cost was $53.48. Unfortunately taxes have increased to 13.4% so to make the numbers equivalent, that would be $54.15. Now let’s look at how much that $16.49 rate costs with all of the taxes and fees built in.
Finally, let’s take this example as cited in the Las Vegas Sun in 2010. I should note that sometime that year the resort fee jumped to $9.95, but for this example the person paid a $39 rate and a $4.50 resort fee. I’ll use the 13.4% tax rate to keep the numbers even.
Rate Breakdown
So let’s break down the total cost of these 3 stays:
- 2010 Total: $49.33 ($57.01 in 2018 dollars)
- 2015 Total: $54.15 ($57.57 in 2018 dollars)
- 2018 Total: $58.38
- Total Increase from 2010 (no inflation): $9.05
- Increase %: 15.51%
Note that when we factor in for inflation the overall cost has only increased 2.34%. Considering the 2010 example might not be the cheapest overall room, I would say it’s fairly safe to say unscientifically that rates are relatively flat over that period.
Resort Fee Breakdown
Now let’s look at the resort fees over the years:
- 2010 Resort Fee: $4.50
- 2015 Resort Fee: $26
- 2018 Resort Fee: $35
- Total Increase (no inflation): $30.50
- Increase %: 87.14%
As you can see the overall cost of the room without factoring for inflation has increased only 15.51% since 2010, however the resort fee has increased 677%! While the rate dropped from $39 to $16.49, the resort fee jumped from $4.50 to $35. But why?
Why Hotels Charge Resort Fees
Why do hotels charge resort fees? It’s simple. Resort fees are a way for companies to avoid paying commissions. When someone books a room through an online travel agent like Priceline or Expedia or a regular travel agent, the hotel company (in this case MGM Resorts) has to pay a commission. You know what they don’t pay a commission on? Resort fees!
In most cases resort fees go directly to the company’s bottom line and they don’t have to share that revenue with anyone. This is why the $4.50 resort fee Excalibur charged in 2010 is now $35 today. A pretty crazy increase, but they also weren’t charging $16.49 for a room back then.
Conclusion
While my study wasn’t an exhaustive one, over time it indicates that the overall cost of a room has only increased slightly while the resort fees have gone through the roof. While these types of numbers will vary by property, in this case consumers aren’t actually paying much more than they would have otherwise. Does that make it feel any better? NO! Resort fees are still confusing and consumer unfriendly, but it looks like they are here to stay.
What are your thoughts on Vegas resort fees or resort fees in general? Do the numbers surprise you?
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For me, the parking at Little Caesars parking was the “last straw”
(tip Venetian hotels still appears to be free, though)
You are doing growth math backwords. $4.50 to $35 is a 677% growth. When you talk increase the base is not the current but the original. (35-4.50)/35
Updated – thanks Chris
http://www.lasvegasdirect.com/las-vegas-hotel-resort-fees resortfeechecker.com So, don’t be a sucker. Do not ever use a hotel with resort fees (or other similar names).
Not really an option on the Vegas Strip.
Interesting as to what is included in the resort fees. Who is still printing a boarding pass? Who is using a hotel phone for local or unlimited phone calls? Reading a printed copy of the newspaper? Resort fees appear to take advantage of services you could easily perform yourself on your cell phone. Although I receive comps for casino play, I will be reconsidering my next Vegas trip. The resort fees are pricing me out of the location.
The point of this was that they have used resort fees to increase their profit (cutting out the OAs) while keeping room rates around the same level.
The resort fee is a 100% FRAUD plain and simple. I am usually against government regulations however this is completely out of hand. If a room is 99.00 with a 35.00 resort fee per night that is a 35% cost. The hotel should be forced to quote $135.00 Net, now what they do now. Many years ago I was checking into a $300.00+ night hotel and they said there was a resort fee of 25.00 or something. I said for what. The front desk said for the pool and crap. My answer, that is what I am paying $300 a night for. I was in Vegas after 9/11 when they started to roll out these fees. I was at NYNY casino . I said what is this money for . I was told it was for the newspaper, internet. LOL. Then another funny one. Mandalay Bay- I check in and I say well at least i can use the gym there. i had in the past even paid for the gym there since its pretty good. I went to the gym/spa and they told me my room resort fee covered the special gym. What was that? That was the vegas hustle. I was told to go to the basement. I found a crummy old newsstand converted with a few old treadmills and bikes and a few racks of weights. That was my VIP resort fee gym access, not the nice/spa gym. Vegas itself (I go often for business) Is a tremendous rip off.
Great story about the gym! Totally Vegas!
If I ever visit Vegas again, it would only be for 1-2 nights, enough to see a show or something. I stay away from properties that have resort fees unless the resort fees are waived on points stays.
What if airlines got away with the same crap to save paying commissions?
“$19.99 return flights to Europe…..(plus $999. mandatory seat fee)
Or stores could try: “Steak $1.09 a pound……(plus $8.95/lb mandatory butcher fee)
It is all so ridiculous, because everyone just wants to know the final price.
I’m similar to JC. I would go 4 times a year. Now it’s been 2 years since I set foot there because it’s too annoying to see these fees for parking, in-room coffee, local calls, etc., and so called “resort fees.”
Vegas has pretty much lost me/us as customers. Resort fees, parking fees, crap odds at blackjack, $13 Stellas at the pool, over-priced steaks, ridiculous comps etc… Even air has gone thru the roof(I know Vegas does not control airlines).
A group of 4 or 5 of us used to go upwards of 4X per year. We might go once now. The value is long gone.
Let’s not forget all the other hidden fees. I just came back from Vegas last month for the first time ever. Booked online and paid for the resort fees in my booking; got to the hotel and they told me I was being charged an additional $350! I got $200 back at the end of our stay but I still haven’t figured out the extra $150 despite receipts from the online booking and the hotel. I won’t be staying there when I return! Not to mention $6 for a Gatorade & $5 for a pop? CVS was a short walk thankfully & well worth stocking up there instead for our stay! At least people were very kind and friendly! I was treated amazingly on my birthday by staff (my father had to tell everyone)!
Removing overall inflation rates and tax increases from the 2010-2018 increase in hotel costs is a form of double counting/credit. It’s inaccurate to say “the overall cost of a room has only increased slightly”.
Real out of pocket cash has absolutely risen substantially by approximately 20% when accounting for changes in room rate, resort fees and taxes (2010 cost $48.72 est using 12% tax, 2018 cost $58.38 as you show). You could say “hotel costs before taxes have risen by a bit more than overall inflation”.
OT, but inflation stats are generally understated anyway based on adjustments dictated by politicians’ preference to use deficit spending to maintain popularity. Here’s stats that maintain pre-1980 and 1990 approaches before a bunch of changes being introduced to lower the official rates:
http://www.shadowstats.com/alternate_data/inflation-charts
I presented all of the numbers with and without inflation to be transparent but I think ignoring inflation would be a mistake. Either way, out of pocket increased at a much smaller rate than the resort fee did percentage wise.
The price should be the price with no math involved. “If it’s not hard to do math,” then the hotels should have absolutely zero problems doing the math for us. (The argument works both ways)
I used to visit Vegas 4 to 8 times a year and now go only once due to the crazy increase in fees from parking to resort fees to energy surcharges to in-room coffee (Delano = $6/cup!) to taxes for the new stadium/convention center expansion. I’ve put this in my social media reviews and hope others will do the same. Vegas will always get the 1st time curious visitor, especially int’l, and the convention guest. But my informal talks with people on elevators tell me they are unlikely to return because they feel nickel and dimed. Even when I’m comped by Mlife or Caesar’s they sock me with resort fee. So my alternative is “old Vegas,” i.e. Reno. No parking fees, 30 degree cool off at night, and employees who are actually friendly with less hassle getting around and scenic nearby L Tahoe to boot!
I get people don’t like resort fees, but it’s not hard to do the math. If hotels A and B are comparable.
Hotel A is $200 + no resort fee and Hotel B is $150+35 resort fee, I’d rather pick Hotel B. It’s basically a lack of awareness and a psychological behavior.
There is definitely an element of psychology here. On one hand I could tell you based on this small analysis that resort fees have increased 87% in 8 years in Vegas. On the other hand I could say the room cost the same. Unfortunately most people will focus on the former and not even consider the latter. That said, there are ways to make this more transparent that are fairly easy to implement.
One thing that is not mentioned is resort fees added to free nights on points and also the addition of paying for parking which has been added lately to many properties.
Yup Vegas overall has gotten more expensive. I decoupled the specific Vegas argument of parking cost because I think the properties have found many ancillary ways to get more money. Just not through the room rates/resort fees. The resort fee argument goes well beyond Vegas and many many properties are adding them to avoid commissions and thus jack up revenue.
@Anthony. Yes very good points. Especially in Vegas the hotels are out to charge you for things that you never paid for.
I think it’s a tactic of baiting potential customers by showing low room rates. The large resort fee is buried in the fine print that many shoppers fail to read. When a customer goes to Expedia and sorts hotels from Low to High rates, properties like Excalibur will appear at the top of the list due to this lopsided method of allocating room rates and service charges. Yes, it might be a strategy for lowing commissions but the impact is far greater in winning business from travelers who don’t do the math.
It is definitely a bigger problem on some sites compared to others, but I would not have an issue with a law that simply makes the final amount paid what is shown. So in this case it would show a rate on the search of $51.95 plus tax and then they could break it down on subsequent screens. Similar to airfare.
I will work diligently to avoid any properties that have resort fees. The rate for the room should be the price and all the tacked on fees are plain tacky. No thanks!
Your point about OTA commissions are exactly right. Another part of the equation is the shift in revenue away from gambling. Your math is sound, but room rates have not been flat for everyone. Excalibur as an example has always been a very easy comp for regular gamblers. As the focus on revenue has shifted away from the casino floor, the comp room has increased substantially in cost as MGM Resorts does not waive resort fees on standard comp room offers. Las Vegas still has incredible value for general travelers, some gamblers on the other hand are finding better value elsewhere.
Yeah I think the rates are flat here, because the Excalibur is an aging property and is largely the same. MGM calculates their revenue per room and then tries to get that through a combination of rate and resort fee. At a property that has been renovated or benefits from demographic shifts I think the rate would certainly increase over time. But does it have to do with increasing resort fees? Based on this I would say no.