United States: Soloway & Mohler Examine Resort Fees And Why Disclosure Is Essential To Avoid Liability

In a recent article for the New York Law Journal, Todd E. Soloway, Chair or Pryor Cashman's Hotel + Hospitality Group, and Bryan T. Mohler examined the disclosure requirements imposed on hoteliers who charge resort fees, and shared best practices for hotels doing business in New York to protect against potential liability under the state's statutory scheme.

(Excerpts of this article were originally published in the New York Law Journal)

You are checking out of your hotel when you spot a new charge – "resort fee" – for $25 per night on the itemized invoice. You loosely remember being told something about that "fee," and with a shrug think, "I guess I have no choice but to pay it."

The charging of resort fees — also known as facility fees, destination fees, amenity fees or urban fees — at hotels is becoming increasingly common. In exchange for paying this generally mandatory fee, assessed by hotels in addition to the cost of the hotel room, hotel guests are supposedly provided access to a variety of goods and services such as gym facilities and swimming pools, luggage storage, "complimentary" happy hours, parking and wireless Internet.

While costs for many of these amenities were traditionally built into the cost of a hotel room, many hotels are now separately charging resort fees as they search for new ways to increase revenue. In charging these fees, hotel owners, operators and brands face the dilemma of how and when to present the existence of a resort fee to travelers booking hotel stays, and the manner in which hotels choose to disclose such fees varies widely. In some cases, resort fees are incorporated into the total per night price quoted to a prospective guest, enabling the consumer to easily compare prices across hotels. In other instances, resort fees are poorly disclosed or not revealed at all during the booking process, appearing only in the fine print of a reservation or on the final booking confirmation screen.

The manner in which hotels disclose the existence of a resort fee is now being scrutinized by various federal and state regulators, as they assess whether the practice may run afoul of statutes intended to prevent deceptive trade practices and false advertising. Consumers and advocacy groups have also started to push for greater transparency, and private class action litigation is beginning to foment.

Concerns at the State and Federal Level

The issue of deceptive practices relating to resort fees was recently the subject of a report released by the U.S. Federal Trade Commission (FTC), Bureau of Economics, entitled "Economic Issues: Economic Analysis of Resort Fees." This report, which examined the costs and benefits to consumers of listing resort fees separate from room rates, found that "separating mandatory resort fees from posted room rates without first disclosing the total price is likely to harm consumers by increasing the search costs and cognitive costs of finding and choosing hotel accommodations." It also found that "separating resort fees from the room rate without first disclosing the total price is unlikely to result in benefits that offset the likely harm to consumers." While the FTC has yet to implement regulations specific to resort fees, it may do so in the near future.

Additionally, amid a growing public concern and calls for action by consumers and advocacy groups, the Attorney General of the District of Columbia, along with at least 46 other attorneys general, has begun investigating the hotel industry's practices of advertising and presenting resort fees to travelers. In June 2017, the District of Columbia, through the Office of its Attorney General, petitioned the U.S. Court of Appeals for the D.C. Circuit for an order enforcing a subpoena it had served on Marriott International in 2016. The subpoena "required Marriott to produce documents relevant to the Attorneys General's investigation into whether Marriott's practice of charging undisclosed or poorly disclosed resort fees in addition to the advertised daily rate for lodging at Marriott's hotel properties...violated the District of Columbia's Consumer Protection Procedures Act...and other state consumer protection laws."

New York's General Business Law

As more consumers and advocacy groups begin to take notice of resort fees and how they are disclosed to travelers, owners, operators and brands need to be aware of the laws governing the disclosures when seeking to implement such a fee.

In New York, hoteliers that do not transparently disclose resort fees during the booking process may run the risk of facing private claims under New York State's General Business Law. New York General Business Law § 349 provides that "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful."

Section 349 of the GBL has been held to be "intentionally broad," covering "virtually all economic activity...[in order to] provide[ ] needed authority to cope with the numerous, ever-changing types of false and deceptive business practices which plague consumers in [New York] State." 

Underscoring the breadth of potential liability under GBL §349, when evaluating whether the practice is deceptive, a court is to "tak[e] into account not only the impact on the average consumer but also on the vast multitude which the statutes were enacted to safeguard — including the ignorant, the unthinking and the credulous who, in making purchases, do not stop to analyze but are governed by appearances and general impressions." Given the deliberately broad interpretations of GBL §349, hoteliers are advised to scrutinize the manner in which resort fees are disclosed to potential guests, ensuring that even the unthinking consumer is aware of the fee-inclusive per night rate early in the booking process.

Looking Forward

If the implementation of resort fees continues to accelerate, litigation over the disclosure of those fees appears inevitable. Given the courts' broad interpretation of GBL §§349 and 350, the issue of transparency in disclosing resort fees needs to be taken seriously by hotel owners, operators and brands alike, as taking proactive steps now to make sure the hotel booking process is compliant with all applicable disclosure laws is a prudent safeguard against potential liability.

In addition, hotel owners would be wise to examine whether, under indemnification language likely drafted prior to the advent of resort fees, they are potentially liable for insufficient disclosures on websites managed and controlled by their hotel operator. The unsuspecting owner may be exposed to sizeable liability for acts of its operator, and owners should take action now to cut off this potential exposure, either by demanding better disclosure practices or revisions to the applicable indemnification language.

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