[co-author: Stephanie Kozol]*
Four state attorneys general (state AGs) — Colorado, Oregon, Pennsylvania, and Texas — have announced resolutions with Choice Hotels International, Inc. (Choice Hotels), a prominent hotel conglomerate known for operating brands like Quality Inn, Sleep Inn, and Econo Lodge, related to the company’s practice of charging hidden “resort” fees.
Specifically, these state AGs alleged that Choice Hotels engaged in “drip pricing,” wherein the initially advertised room rate did not disclose all unavoidable fees, including the resort fee. Choice Hotels did not disclose these fees until the last page in the online booking process or upon hotel check-in. As part of the settlement, Choice Hotels committed to disclose all mandatory fees, including resort fees, on the first page of its booking website as part of the total room rate.
The state AGs’ scrutiny of Choice Hotels’ practice is not an isolated incident. Earlier this year, the Texas AG sued Hyatt Hotels, alleging the chain charged consumers mandatory and unavoidable fees — such as resort fees, destination fees, or amenity fees — in addition to daily room rates. Similar lawsuits and settlements have been entered into between state AGs and Marriott and Hilton.
More broadly, State AGs have also reached resolutions with food delivery platforms related to their alleged failure to disclose mandatory fees upfront. At the end of 2022, District of Columbia (DC) and Pennsylvania State AGs settled with Grubhub over in-app transparency on prices and costs. DC AG's allegation focused on Grubhub "charging customers hidden fees and using deceptive marketing techniques to increase profits.
Why It Matters.
State AGs have been actively addressing the issue of hidden fees for some time, calling these fees unfair and deceptive when not clearly and conspicuously disclosed to customers. Federal regulators are also stepping up their efforts, with President Biden launching an initiative to crack down on junk fees. Businesses engaging in drip pricing practices may soon face a triple threat of three different regulatory regimes reviewing their practices. To avoid such scrutiny, at a minimum, businesses should clearly and conspicuously disclose all the unavoidable fees upfront the first time a price is presented in an advertisement, etc. However, best practice is to disclose the total cost and not require consumers to “do the math,” particularly because some regulators have required this in their settlements.
*Senior Government Relations Manager