Booking to Charge Commission on Resort Fees in Major Shake-Up for Hotel Revenue

In a game-changing move, Booking.com is notifying hotels around the world that it will begin charging them commissions on resort fees, as well as other fee-based services, such as for Wi-Fi, on top of a hotel’s base rate, Skift has learned.

This is believed to be the first time Booking.com or any other major online travel agency charged commissions on controversial resort fees, although it may be in some hotel contracts, but was never implemented.

Hotels levying resort fees have often used them to avoid paying commissions to travel agencies to boost their own coffers.

Resort fees have been a lightning rod between hotels and consumers. The fees are not part of the advertised base rate for a room and can vary by hotel and city. In Las Vegas, for example, resort fees are sometimes higher than the room charge. Hotels rationalize charging the fees because they say it pays for various amenities at hotels, including pool use, gym access and newspapers. Consumer groups have argued resorts fees are not disclosed clearly enough to potential guests.

Booking.com views some hotels penchant for charging resort fees as a way to game the system, and therefore cheat the online travel agency out of the compensation it believes it deserves for driving business to the properties.

Commenting on the move, Booking Holdings spokeswoman Leslie Cafferty said: “As an extension of our overarching aim to provide our customers with transparent information about the total price they will need to pay at a property when they make a booking and to create a level playing field for all of our accommodation partners, we are updating our process when it comes to charging commission on mandatory extra fees that customers are asked to pay at the property.”

[UPDATE: The rollout of Booking.com’s commissions on hotels’ resort fees is expected to take place gradually by region. U.S. hotels are expected to start seeing the new charges in June, for example.]

Some notifications to hotels went out late last week informing them of the change. Booking informed them that its new policy would be implemented globally, and there would be no exceptions, sources said.

Vital Vegas tweeted about Booking.com’s commission change Friday, and some hoteliers confirmed the news to Skift. Vital Vegas tweeted: “This could change everything. Booking.com is reportedly informing hotels they’ll charge commissions on resort fees. Avoiding commissions on resort fees is a huge reason they exist. Will hotels push back, or is tis the beginning of the end for resort fees?”

This could change everything: https://t.co/zps0AAOsjm is reportedly informing hotels they'll charge commissions on resort fees. Avoiding commissions on resort fees is a huge reason they exist. Will hotels push back, or is this the beginning of the end for resort fees?

— Vital Vegas (@VitalVegas) May 17, 2019

In destinations such as Las Vegas or Hawaii, for example, resort fees can be a substantial portion of a hotel’s guest revenue.

Bellagio Charges an 18 Percent Resort Fee

The base rate for a resort king room at the Bellagio in Las Vegas for Tuesday night on Booking.com is $239 with a resort fee of $44 per night, or more than 18 percent of the base rate. Booking’s commission would be charged on the $283 instead of merely on the $239 base rate. If Booking were charging a 10 percent commission, it would collect  about $28.30 per night instead of $23.90.

When hotels charge for Wi-Fi or bike rental fees, Booking.com would collect commission on these services, as well. Because Booking.com, unlike Expedia, mostly offers an agency model where guests pay the hotel at checkout rather than prepay, it is easier for Booking to collect the commission on the rate plus other fees than it would be for Expedia, which does more prepay business.

Delano Las Vegas at Mandalay Bay was charging a $359 base rate on Booking.com for a stay Tuesday night with a resort fee of $41.95 nightly.

Cheaper hotels in Las Vegas sometimes charge resort fees that are higher than the base rate. For example, a stay Tuesday night in a manor king room at Circus Circus Hotel in Las Vegas was being offered on Booking.com for just $22 per night, but the nightly resort fee was $36.28.

Lightning Rod

Resort fees have been controversial in Las Vegas and certain other destinations around the world, such as in the United Arab Emirates, because in recent years they often were not communicated transparently to guests, many of whom were surprised to learn of the full price of their rooms at checkout, and felt like they were being gouged.

Starting in 2012, the U.S. Federal Trade Commission began warning hotels and online booking sites about “drip fees,” meaning they weren’t transparently disclosing the full room rates. Although there has been some improvement on disclosures — Booking.com, for example was listing both the room rate and resort fees when it showed rates — some opine that the commission has taken little action.

Implementation Would Be Easier for Booking Than Expedia

Implementation of the fee could have hotels choosing to abandon Booking.com for other online travel agencies, if Expedia Group doesn’t match Booking’s move. It could also lead to higher rates for consumers if hotels pass along the higher commissions.

Many hotels don’t charge resort fees so they wouldn’t be affected. If it turns out that Booking’s new resort fee policy would have a material affect on its financials, then it would have to file a notice with the U.S. Securities and Exchange Commission.

Expedia Brands

While Expedia.com and sister brands Hotels.com, Travelocity, and Orbitz bring a lot more travelers to Las Vegas, where resort fees are common, through hotel-only and vacation package bookings, than does Booking.com, the latter is responsible for substantial volumes, as well.

An Expedia Group spokesperson declined to comment on Booking’s new policy.

It was unclear at publication time if other Booking Holdings brands, such as Priceline and Agoda, would follow suit, but it wouldn’t be a surprise if they did.

Most of the big hotels in Las Vegas sell their rooms through both Expedia Group and Booking Holdings, and would be hard-pressed to abandon Booking because of the resort fees, although dropping out is possible especially if done en masse.

Booking.com’s decision to begin charging commissions on resort fees would boost its revenue, and it could have the side benefit of discouraging hotels from levying such often-despised fees in the first place.

Booking, as well as other online travel agencies, would likely prefer to see resort fees end up on the scrap heap because they end up on having to explain them to unsuspecting guests, even thought it is hotels charging the surprise fees and not online travel agencies.

Booking obviously felt it was being taken advantage of by not being fairly compensated for the hotel revenue it generates for the properties. On the other hand, some hoteliers might argue that Booking is overstepping its role as it didn’t build the property, operate the hotel, hire employees to provide the service or entice people to use the fitness center or to rent a bike. In this view, Booking is being greedy, hoteliers might counter.

As one Twitter user wrote, “Las Vegas resort fees were invented as a backdoor way to prop Strip casinos’ bottom line while excluding their corporate booking partners from the windfall. Their fighting will end once the next economic downturn lays the industry bare again. It’s a $$$ grab before reality sets in.”

Las Vegas resort fees were invented as a backdoor way to prop Strip casinos bottom line while excluding their corporate booking partners from the windfall. Their fighting will end once the next economic downturn lays the industry bare again. It's a $$$ grab b4 reality sets in

— Otis With The Fibrosis (@PossumTwister) May 18, 2019

The American Hotel & Lodging Association and the Nevada Hotel and Lodging Association didn’t immediately respond to a request for comment.