July lawsuits against two hotel chains renewed focus on "drip pricing." This occurs when guests search for hotel rooms and first see only room rates. A property's mandatory fees appear after a few clicks, then revealing full costs.
In September, two U.S. House Representatives introduced the Hotel Advertising Transparency Act of 2019. If passed, hotels and short-term rental services would have to display room rates showing all costs except government taxes and fees.
Hotels have company in drip- pricing practices. Ground transportation providers like chauffeur services and brokers often display fares similarly. As with hotels, ride service drip pricing tempts customers with the first price rather than full fares.
The courts and/or Congress will decide drip pricing's legality. Regardless of the outcome, "it's in complete conflict with the industry's messaging," says Robert Cole, Phocuswright's senior research analyst for lodging and leisure travel. "Hospitality and drip pricing are two mutually exclusive things. Drip pricing is the antithesis of putting the guest first and what hospitality is supposed to mean."
A broker may "drip" a few dollars on the originally displayed fare. But some chauffeur companies "pour" much costlier fees. These complicate budgets and decisions for travelers and travel managers.
Consider this real example from a legacy limousine service. A corporate traveler may think that company policy permits a $100 transfer from Manhattan to Newark, as first shown on the provider's website. However, after requesting the ride, the price gushes to $167. Mandatory fuel, administration and tolls cost $47 and a negotiable tip is $20. The ride may then violate policy.
Another chauffeur service shows a base fare of $82 from O'Hare to Chicago. Clicking the information circle reveals that tip, taxes, fees and tolls will appear on the payment screen. Clicking to request the ride shows a $126 estimate. The fine print admits that tolls or airport parking could further increase the fare.
Mandatory fees increase the New York ride by 47 percent and the Chicago trip by 54 percent. By comparison, ResortFeeChecker.com says nightly hotel resort fees average $21. That's a 6 percent increase on New York hotels' average daily rate and a 10 percent increase on Chicago hotels' average daily rate.
Furthermore, corporate travel managers would struggle to compare suppliers' rates. Base fares show only partial payments. Each company's assortment of fees differs. Some cost the same per ride and others cost a percentage of base fares. Suppliers also add extras that vary by location, such as road tolls, parking and airport access fees. International rides bring more complexity with different currencies, terms and conditions.
How can artificially low fares possibly benefit travel buyers and business travelers?
We call the industry to show all-inclusive rates. The first and final prices should match online and in RFPs.
Suppliers may counter that they have to charge for all costs. We agree. Companies must account for the highest vehicle payment to the smallest airport fee.
As their fee structures show, though, they already do. They cover some expenses in base fares, some in fees that accompany all bookings, and some in local fees charged after rides. But this misleads buyers.
Suppliers know the prices of extras they will charge after rides. Road tolls and airport access fees are no secret. Operators know how long vehicles park at airports on average. But suppliers withhold them from upfront costs. This can cause buyers and travelers to feel misinformed by sneaky tactics. It also increases fraud risks. For example, delayed flights open an opportunity to hike parking fees for airport pickups.
The way forward is transparency with a single fare. This has been Blacklane's approach from day one. Ride-hailing companies show a single fare of all mandatory costs, with a tip option when rides end. What excuse do other ride services, particularly those who tout service and quality, have?
Certainly, suppliers must allow for exceptions. Buyers will not protest paying extra for spontaneous stops or exceeding the allotted distance of an hourly ride. But known costs can and should be combined.
Ground transportation companies pride themselves in duty of care, taking responsibility for the guest's safety and well-being. We also have a duty to care about the entire guest experience. That should include transparent and consistent fares.