United States: Washington, DC And Nebraska Challenge Hotel Resort Fee Disclosure Practices

Last Updated: August 2 2019
Article by William M. Bosch, Matthew Shultz and Keron J. Morris

Earlier this month, the Office of the Attorney General for the District of Columbia (the District) sued Marriott International, Inc. (Marriott) in the Superior Court for the District of Columbia for alleged price deception.1 Two weeks later, Nebraska's Attorney General sued Hilton Dopco Inc., also known as Hilton Domestic Operating Company Inc. (Hilton), in the District Court of Lancaster County, Nebraska for alleged price deception.2

The District's complaint alleges that Marriott violated the District's consumer protection laws by engaging in deceptive practices when advertising and charging resort fees for hotel rooms booked through its website and when advertising prices on online travel agency (OTA) websites. Specifically, the complaint alleges that Marriott misrepresented its room cost by failing to adequately disclose that it would charge resort fees in addition to the advertised room rate, presenting the resort fee as a government-imposed tax or fee, and representing that the resort fee covered amenities that were either complimentary or for which consumers were still required to pay, in violation of the District's Consumer Protection Procedures Act (CPPA), DC Code § 28-3901, et seq. The District claims that Marriott's hidden fees have earned the company millions of dollars in profit for at least a decade and is seeking an injunction, consumer restitution, attorney's fees and costs, and civil penalties.

Similarly, Nebraska's complaint alleges that Hilton violated Nebraska's consumer protection laws by engaging in deceptive practices when advertising and charging resort fees for hotel rooms booked at its properties over the telephone, on its website and on OTA websites. Specifically, the complaint alleges that Hilton misrepresented its room cost by failing to adequately disclose that it would charge resort fees in addition to the advertised room rate and representing that the resort fees covered amenities that were complimentary, in violation of Nebraska's Consumer Protection Act, Neb. Rev. Stat. § 59-1601, et seq, and Uniform Deceptive Trade Practices Act, Neb. Rev. Stat. § 87-301, et seq.3 Nebraska claims that its consumers have been harmed by Hilton's hidden resort fees since 2012 and is seeking an injunction, consumer restitution, attorney's fees and costs, and civil penalties.

Allegations

The crux of both lawsuits is that drip pricing confused consumers and deprived them of the ability to readily ascertain and compare the actual price of a room at Marriott's and Hilton's hotels to those of their competitors. Drip pricing refers to the practice of initially showing only part of a product's or service's price and adding charges during the purchasing process. Here, the District's and Nebraska's allegations are focused on resort fees, such as "amenity fees," "destination fees," "daily mandatory charges," and "urban destination fees," added to advertised room rates during the online room reservation process on each company's website and on OTA websites or, according to Nebraska's complaint, during the telephone reservation process.

The District's Lawsuit. The District's complaint highlights four instances where it claims Marriott misled consumers during the room reservation process on its website.

First, the District alleges that Marriott's website prominently displayed the minimum daily room rate for one of its Las Vegas properties on the webpage where consumers could select from among several listed properties. The District alleges this was misleading because Marriott listed the minimum room rate without including the resort fees in the quoted rate or mentioning that there were resort fees in addition to the quoted rate. The complaint adds that if a consumer searched OTA websites, such as Expedia, they would receive a similar quoted room rate that also did not include or mention the resort fee. 4

Second, the District alleges that once at the room selection webpage for that Las Vegas property, the Marriott website disclosed a "daily destination fee" but prominently displayed daily and total room rates that did not include the daily destination fee. The daily destination fee was mentioned in a rectangular banner at the top of the webpage, which stated: "USD 30 daily destination amenity fee added to room rate incl free play at local casino, whiskey/wine tasting and more." The District alleges that this disclosure was inadequate because the statement was less prominently displayed than the room total, the box in which the disclosure appeared was shaded and "obscure," and the statement did not clearly indicate whether the destination fee had already been or would be added to the quoted daily rate.5

Third, the District's complaint notes that Marriott's disclosure regarding resort fees that appeared on its room selection webpages often stated that certain amenities were included in the resort fee, but Marriott often stated later in the room reservation process that it charged separately for those same amenities or provided them on a complimentary basis to guests of the hotel.6

Fourth, the "Review Reservation Details" webpage for the Las Vegas property, which is presented after a consumer selects a room, provided the subtotal for the consumer's reservation with the resort fee included in the "Taxes and fees," effectively presenting the resort fee as a government-imposed tax or fee, according to the District.7

Nebraska's Lawsuit. Nebraska's complaint highlights five instances where it claims Hilton misled consumers during the room reservation process on its website or during the telephone booking process.

First, Nebraska alleges that Hilton's website prominently displayed two minimum daily room rates an "Honors Discount" rate and a non-"Honors Discount" rate for one of its Las Vegas properties on the webpage where consumers could select from among several listed properties. Nebraska alleges this was misleading because Hilton listed the minimum room rates without including the resort fees in the quoted rates or mentioning that there were resort fees in addition to the quoted rates.8

Second, Nebraska alleges that once at the room selection webpage where a "daily resort charge" is disclosed for the Las Vegas hotel, the Hilton website also prominently displayed daily room rates that did not include the daily resort charge. The daily resort charge was mentioned twice on the room selection webpage—once, in a rectangular banner at the top of the webpage, which stated: "Daily Resort Charge will be added to room rate and includes: Internet access; fitness center access; valet/self parking; buy 1-get 1 free cocktail, beer or wine in Oakville Steakhouse 5pm to 7pm; 2 for 1 at Laugh Factory; discounted show tickets; 2 bottles of water per day; local/toll-free calls" and another time "[e]lsewhere" on the webpage in a disclosure that stated: "Price per night (USD) Plus $37.00 USD resort charge per night, plus tax[.]" Nebraska alleges that these disclosures were inadequate because they were less prominently displayed than the room total with smaller and lighter colored font and, regarding the disclosure at the top of the page, because the box in which the disclosure appeared was shaded and "inconspicuous."9

Third, Nebraska's complaint alleges that the next webpage in the room reservation process—the "Reservation Summary" webpage—where consumers were required to complete a "Guest Information" section before moving on in the reservation process, provided the daily room rate without including the resort fees in the quoted rate or mentioning that there were resort fees in addition to the quoted rate.10

Fifth, Nebraska's complaint noted that many of the amenities that Hilton stated were covered by resort fees were actually complimentary, such as access to the fitness center and local telephone calls.11

Fifth, Nebraska's complaint adds that Hilton's representatives for its properties, such as telephone operators and front desk staff, also failed to disclose resorts fees to consumers who called Hilton's properties.12

Relief Sought

In its complaint, the District asks the court to enjoin Marriott from advertising daily rates that do not include mandatory resort fees, to order Marriott to pay restitution for amounts it collected from District consumers in violation of the CPPA, to order Marriott to pay statutory civil penalties for every violation of the CPPA, and to award the District its costs and reasonable attorney's fees for bringing and investigating this action.

Similarly, Nebraska asks the court to enjoin Hilton from advertising daily rates that do not include mandatory resort fees, to order Hilton to pay restitution for amounts it collected from Nebraska consumers in violation of its Consumer Protection Act and Uniform Deceptive Trade Practices Act, to order Hilton to pay $2,000 in statutory civil penalties for each and every violation of its Consumer Protection Act and Uniform Deceptive Trade Practices Act, and to award Nebraska its costs and attorney's fees associated with this action.

Takeaways

State and federal enforcers have been focused on hotel resort fees for several years. The District's and Nebraska's complaints grew out of a larger investigation by the attorneys general of all 50 states and the District into the pricing practices of the hotel industry that began in 2016. In 2012, the Federal Trade Commission (FTC) sent warning letters to 22 hotel operators about their resort fee disclosures,13 and in 2017, the FTC published an Economic Analysis of Hotel Resort Fees.14 Resort fees have also been the subject of private litigation,15 as well as legislative efforts seeking to regulate how hotels advertise room prices and resort fees.

The District's lawsuit against Marriott and Nebraska's lawsuit against Hilton are the most recent reminders to hotel operators that enforcers are still focused on resort fees. Time will tell whether the courts agree with the District and/or Nebraska. For hotel operators that charge resort fees, it is a good time to review how and when those fees and the total cost of a stay are advertised and disclosed to consumers and the accuracy with which they describe the amenities that are included in the resort fee, both on company-owned and OTA websites, as well as during the telephone booking process.

Footnotes

1. Compl., D.C. v. Marriott Int'l, No. 2019-CA-4497 (D.C. Super. Ct. July 9, 2019).

2. Amend. Compl., State of Nebraska v. Hilton Dopco Inc., No. CI 19-2366 (Neb.Dist.Ct. July 24, 2019).

3. Amend. Compl., State of Nebraska v. Hilton Dopco Inc., No. CI 19-2366.

4. Compl., D.C. v. Marriott Int'l, No. 2019-CA-4497, at 8.

5. Compl., D.C. v. Marriott Int'l, No. 2019-CA-4497, at 9-10.

6. Compl., D.C. v. Marriott Int'l, No. 2019-CA-4497, at 11-12.

7. Compl., D.C. v. Marriott Int'l, No. 2019-CA-4497, at 10.

8. Amend. Compl., State of Nebraska v. Hilton Dopco Inc., No. CI 19-2366, at 7-8.

9. Amend. Compl., State of Nebraska v. Hilton Dopco Inc., No. CI 19-2366, at 15-16.

10. Amend. Compl., State of Nebraska v. Hilton Dopco Inc., No. CI 19-2366, at 17-18.

11. Amend. Compl., State of Nebraska v. Hilton Dopco Inc., No. CI 19-2366, at 4.

12. Amend. Compl., State of Nebraska v. Hilton Dopco Inc., No. CI 19-2366, at 6.

13. Warning Letter, F.T.C. (Nov. 2012).

14. Mary Sullivan, Economic Issues: Economic Analysis of Hotel Resort Fees, F.T.C. (Jan. 2017).

15. See, e.g., William M. Bosch & Matthew Shultz, Resort Fee Case Against Wyndham Moves Forward (Feb. 27, 2017).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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