The End of Resort Fees?

I'd Lay Against

Senator Claire McCaskill of the State of Missouri has laid out Senate Bill S.2599 in the 114th Congress known as the, "Truth in Hotel Advertising Act of 2016," that would effectively put an end to all resort fees and require hotels to clearly include any fees (other than taxes and Government imposed fees) in the base rate of a room:

https://www.congress.gov/bill/114th-congress/senate-bill/2599

The concept of Resort Fees is one that has irritated the guests of many of the nation's hotels, not least of which is included guests in various Las Vegas Casinos including those whose rooms were, 'Comped,' but who then had to pay the resort fees anyway.  There are arguments to be made both for and against Resort Fees, but let's take a look at why these fees might exist in the first place:

Resort Fees May Serve as a Hidden Charge

One argument for why casinos and hotels may impose Resort Fees on guests is because they enable the hotel in question to advertise a lower base rate knowing that the Resort Fee is simply going to be tacked onto the rate at a later time during the booking (or, perhaps, even as the guest is checking out) thereby enabling the establishment to deceive the consumer into thinking the costs of the room will be lower than they actually are.  

Personally, I suspect that this is the case in Non-Vegas, or more generally, no-casino hotels that impose a resort fee, but for the Las Vegas Casinos, I suspect the reasoning might be somewhat different:

It Allows the Casino to Break Even on a, 'Comped,' Room

The goal of offering a patron a comped room, if you are in the casino business, is in the hopes that the expenses outlaid by way of offering the room (and any other comps) will be exceeded by the patron's Expected Loss on the casino games that he/she chooses to play.  In the vast majority of cases, casinos certainly do not offer comps with the intention of losing money on them, and based on a player's historical play, comps are generally expected to be a fraction of a patron's expected loss.

However, the play of a guest may not always meet expectations, and when this happens, the casino may not want the costs of offering a free room (and other niceties) to exceed the Expected Loss based on the player's action.  It is possible, then, that Resort Fees for Las Vegas casinos are largely predicated on what the casinos believe is the actual cost, to them, of providing the free room and services associated therewith.  

In fact, as I look through the various lists of resort fees that Las Vegas casinos charge and compare them to the amenities offered (i.e. the free ones) to the guests of the hotel, I could actually see where this theory may be quite plausible.  The higher end hotel-casinos with the better amenities (pools, exercise rooms, etc.) generally have somewhat higher resort fees than the more basic properties who offer little more in terms of a, 'Resort,' than Wireless Internet access which, as most people know, can be had for no additional charge at just about any Economy chain hotel in the country.  To wit, many of these casino-hotels are no more a resort than your average Super 8, with the only exception being that they happen to be attached to a casino.

Therefore, depending on the level of player that a casino perceives an individual guest to be, it is possible that the casino does not necessarily want to offer the patron a completely free room, instead, they simply do not want to make any profit on the room.  If this was my goal as a business operator, then I would almost assuredly also charge a Resort Fee that is generally in line with my costs of offering the actual room to patrons.  Effectively, if all of the patrons of my hotel paid just the Resort Fee, nothing more and nothing less, then the hotel would simply break even on the year.

Arguments in Favor of Resort Fees

To the extent that Resort Fees may represent what the casino perceives as the cost of the room to them, one argument in favor of Resort Fees is that it gives the casino the ability to offer more players more comped rooms knowing that they are actually breaking even on the actual cost of the room.  Certainly, it would seem like more of a nicety for the casino to offer a, 'Comped,' room than a room at some seemingly arbitrary percentage off to ensure that the casino breaks even on that room.  Imagine getting an offer in the mail for a room at 80% off, not only does it look worse than a, 'Comped Room,' from a Marketing perspective, but the perception of offering such a discount as opposed to a completely free room might seem chintzy to the patron.  The patron may actually be insulted by the fact that he/she is expected to pay 20% of the Base Rate.

Another argument in favor of Resort Fees is that they too can be waived in the event that a certain caliber player requests that they be waived.  Some casinos do not charge Resort Fees at all for players at certain Players Club Card levels.  Furthermore, if a player is initially supposed to pay the Resort Fees, but then shows a certain level of play, the player can then request the casino look into the possibility of waiving the Resort Fees.  That gives the casino the ability to essentially comp the room without comping the room, something of a hedge, if you will, in the event that the Player's action does not meet the expectation required to waive the Resort Fees.

Arguments Against Resort Fees

The main argument against Resort Fees is that they essentially amount to a hidden charge for patrons who are either comped a room or are playing for a room that is not revealed until various points of the booking process.  Some people have even alleged that they were not notified of any such fee until they had already completed the booking, but that has never been my experience.  The argument that Senator McCaskill, as well as many other patrons, make is that the property can simply increase the base rate by an amount equivalent to the resort fee.  

Conclusion

Personally, I do not necessarily have a problem with Resort Fees as long as they are fully disclosed as a line item well before a reservation is completed.  Preferably, they would be disclosed in as upfront of a way as possible, for instance, by always advertising them just below the room rate on all booking channels, but that is unlikely to happen.  I certainly understand why there could be some categories of patron for which a casino might wish to offer a comped room, but also wishes to hold back on potentially comping the resort fee until they see what the patron's action looks like.  

Furthermore, also from a Marketing standpoint, comping the Resort Fee also serves as an additional nicety for patron's whose play justifies it.  

One thing that I will say seems somewhat ridiculous is a property charging Resort Fees when said property would not actually qualify as a resort under almost any standard.  For example, the Resort Fees for the Golden Gate Casino show up as fine print when you actually get to the booking page in which you input all of your information.  I selected April 27th essentially at random and found that the Room Rate is $24 and the Resort Fee is $20, 83.33% of the Room Rate!!!

Beyond that, here is a question for you: What the Hell qualifies the Golden Gate as a resort?  The Golden Gate has a bar, diner, a few Table Games and a compact little slot floor.  I've not stayed there personally, but I have heard second-hand that the rooms also leave something to be desired even compared to sister property, The D.  In the case of The D, at least it has a pool,(seasonal) multiple eating options, three bars and a showroom.  Essentially, one can at least make a (poor) argument to categorize The D as a resort, not so for the Golden Gate.  

As with most things, I end up somewhat in the middle.  I would take a look at a property, and if it has a Resort Fee, what the cost of the Resort Fee is and determine, on a case-by-case basis, whether or not the Resort Fee can at least be justified.  For example, Mandalay Bay has a Resort Fee of $33.60 per night, so how in the Hell does the Golden Gate propose to justify $20?  

The answer is: They can't.  Golden Gate has a Resort Fee, but not really, really they're just charging $42.00 for a hotel room.  It may be Resort Fees such as those that the good Senator is trying to target.

Tweet

Posted by

Comments

ukaserex Apr 01, 2016

Good article, as usual!

From a gaming perspective - having a room comped for me was historically done at the end of my visit. The notion of getting a room comped prior to gaming is to me bad business. Only recently have I been playing frequently enough, or at high enough level to get these pre-comped rooms.

I tend to look at like they are comping me based on my last visit - when they comp me ahead of time. Therefore, there should be no disappointment from their marketers and bean counters should I fail to lose, or not play "enough".

But, on the whole, resort fees are an extra revenue generator. The hotels would like them to become as common as the tips many of us feel compelled/obligated to pay for service. I don't see it happening. People like me will just avoid those places that charge them.

Mission146 Apr 01, 2016

Ukaserex,

Thank you for the compliment!

From a Marketing standpoint, you have to maintain an edge against your competition at all times. I think that there was certainly a time where the standard may have been, "We'll see what your play gets you," but it only takes a handful of locations in a highly competitive market such as Atlantic City or Las Vegas to start pre-comping to get an advantage, and pretty soon, everyone essentially has to do it to get people in.

Furthermore, you should also consider that many people are, 'Pre-Comped,' before they have ever played at a property to begin with. This can come by way of host referrals, front money, being a known player to a certain chain of casinos/corporation, establishing a credit line...or a few other ways that I will not discuss due to them being told to me in confidence and I would not otherwise know about them.

If you're playing a Negative Expectation game, or if the casino at least perceives that you are, then nobody at the property should be disappointed if you, 'Fail to lose,' and it is ridiculous if they are. Can you imagine a host actually saying, "Sorry, we only comp your room if you lose," that property would eventually be disparaged on every gambling source out there.

With respect to, "Not playing enough," it is true that advance offers (including Free Play) are predicated upon previous play, ergo, it is your previous play that, 'Earned,' those comps. That being said, any upfront comps are usually based on an expectation of what your action will be when you stay at the property, so it makes perfect sense for the property to be disappointed if you don't play, 'Enough.' To wit, they are not rewarding you entirely for what you have done in the past, per se, but also rewarding you pursuant to an expectation of what you will do in the future. If you pick up Free Play offers from a casino and roll out, your offers will either gradually or quickly go down, eventually to nothing. The Free Play that you get, in one fashion or another, is based on whatever metric they use to gauge your previous action, so for the offers to remain consistent, the action must remain consistent.

They do generate extra revenue, I suppose the question I was trying to answer in the Article is: Why would they use Resort Fees rather than just raise room rates to begin with? Knowing what the cost of renting a hotel room is (for the hotel) and comparing it to the cost (and remember, this includes utilities and usage across the whole hotel regardless of how many guests are there) that I project would be consistent with actual Resorts, such as on The Strip, I have some confidence that my theory is correct. They comp the room but not the fees, ergo, they break even on the room itself.