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U.S. presidents don’t usually wade into the minutiae of airline seat selection, yet that’s exactly what President Joe Biden did during his State of the Union Address earlier this year, spending nearly two minutes of the speech decrying “junk fees.”
The past decade has seen an explosion in the sophistication with which airlines, hotels and vacation rentals earn additional revenue through add-on fees. Yet travelers, and the politicians who represent them, may have had enough.
“Consumers have been fed up with this for some time,” says Lauren Wolfe, counsel at traveler advocacy group Travelers United and founder of the website KillResortFees.com. “Americans shouldn’t have to deal with deceptive drip pricing,” Wolfe added, referring to the practice in which fees are added throughout the checkout process rather than disclosed upfront.
Now the question is what changes to these fees could be in store and what those changes will mean for travelers.
HOW WE GOT HERE
The “à la carte” model of offering low initial prices with fees for add-ons became commonplace in the internet search era. Customers using online search tools to book travel were looking for the cheapest option, which incentivized budget airlines such as Spirit and Frontier to offer low base fares with costlier add-on fees.
“You have low-cost carriers competing by offering lower fares, and traditional airlines attempt to ignore that threat as long as possible,” explains Jay Sorensen, president of IdeaWorksCompany, an airline consulting firm. “At some point, the dam bursts and they have to compete with low-cost carriers.”
Ancillary revenue — the industry term for revenue from fees and other add-ons — increased from 6% of total global airline revenue in 2013 to 15% in 2022, according to a report from IdeaWorksCompany. A similar trend played out in hotel resort and amenity fees, which began in vacation destinations such as Orlando and Las Vegas but has spread to destinations with few resorts.
“If you want to stay at an above-average Marriott hotel in Boston, there’s an 85% chance you’ll get a resort fee,” says Wolfe, citing data she collected. “I was surprised that my recent hotel in Tulsa didn’t charge one.”
CHANGES ALREADY AFOOT
Although Biden’s proposed reforms have not passed Congress, the industry has begun responding preemptively, removing and clarifying some problematic fees.
Airbnb, which has caught flak for its cleaning fees , has introduced the option to see full prices in search results, including all taxes and fees.
Airlines have also eased seat selection fees, which have caused confusion and expense for travelers, especially families. United Airlines recently introduced new features to let children under age 12 sit next to an adult without extra fees. And low-cost carrier Frontier Airlines launched a similar feature for children under 14.
Yet, Sorensen argues, it may be too little and too late to avoid government intervention.
“Airlines did the wrong thing in this regard, in that they should have accommodated families earlier on. What was happening at the airport was chaos,” he says, citing how some families wanting to sit together tried to switch seats with other customers at the gate or on the plane.
WHAT’S NEXT?
Biden has proposed the Junk Fee Prevention Act, which would affect airline seat selection and resort fees. The act must pass through a divided Congress, but that may not be as difficult as it sounds.
“Junk fees are universally hated. It’s a unique bipartisan issue,” says Wolfe. “The people who are defending junk fees at hotels are the politicians who are paid off by the hotel lobby.”
Wolfe believes the hotel industry won’t change its add-on fee structure until Congress forces it to. The Biden administration could enforce new rules on airlines, which have more regulation at the federal level, but it hasn’t done so yet.
“I think the Department of Transportation has dragged their feet on the issue,” Sorensen says. “They’ve had regulatory authority to deal with this for years and haven’t.”
It may come down to the efforts of industry lobbyists versus the political will of fed-up constituents.
“It’s not going to stop until someone tells them to stop,” says Wolfe.
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This article was provided to The Associated Press by the personal finance website NerdWallet. Sam Kemmis is a writer at NerdWallet. Email: skemmis@nerdwallet.com.
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