White House seeks to end hidden airline and hotel charges

One of the more irritating issues about shopping in the United States is that frequently the headline price of goods is not the final amount that has to be paid.

In shops taxes are regularly omitted from the prices marked on the shelves, and then added to the bill at the checkout. Hotels, particularly in cities such as New York, have in recent times begun adding extra charges similar to those applied traditionally by those in holiday resorts. This means that the headline amounts highlighted on travel websites are not the final bills.

Supplementary amounts – variously described as “resort fees”, “processing fees” or “destination fees” or some other euphemism aimed at extracting more money – of $30, $35 or $40 per day can be added to take account of facilities such as internet access or in-room bottles of water which previously were included in the main price.

It is hard to escape the likelihood that city hotels are seeking to recoup losses incurred during the Covid-19 pandemic while at the same time not wanting to increase the headline price set out in the travel websites that attract potential customers. References to these additional charges tend to be found deep inside the details of particular hotels on travel websites.

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Earlier this week US President Joe Biden announced a crackdown on what he criticised as “unnecessary hidden fees”. He said these were “hitting families at a time when they can’t afford it”.

Particularly in his sights were airlines. But hotels, credit card companies and mobile phone operators were also in the frame. The president said airlines would have to be much more upfront with passengers about additional fees they levy as part of a new drive towards greater transparency.

One of the biggest money spinners for airlines are baggage charges, with some now levying additional sums for carry-on luggage as well as bags placed in the hold, depending on the type of ticket purchased. Given there are an estimated 45,000 flights across the United States each day, the revenue involved can be vast.

The US department of transportation this week estimated that airlines in the country had generated an eye-watering $5.3 billion in baggage fees and nearly $700 million on cancellation and change fees last year. Of course, in addition, airlines also apply other charges for example, sitting further forward in the aircraft – to ensure a faster exit – and for seats with extra legroom.

The Biden administration wants airlines to be fully open about the true costs of an air fare as potential passengers compare prices rather than discovering later on that they may face, for example, an extra charge for carrying a bag on board.

Under proposed new rules airlines and travel sites would have to disclose on the first occasion the airfare is displayed any additional fees for families sitting together or for changing flights.

Biden criticised airlines in particular for charging fees for families to sit together and for requiring customers to pay flight change fees – even for flights cancelled by the airline. “They cancel on you, and you have to pay a fee to rebook,” he said. “Come on, man. It’s just simply not fair. It’s not fair.”

The president argued that the proposed clampdown on “unnecessary hidden fees” would help consumers struggling financially as a result of inflation and generate more competition between carriers. “Capitalism without competition isn’t capitalism, it is exploitation,” he said.

The president said the proposed new rules – which will now go out for a consultation process – would require airlines and search websites “to disclose these fees upfront, so you have a choice to go to the airline that doesn’t charge the fee to change – that doesn’t have the fee. That’s competition.”

Of course, with inflation running at more than 8 per cent there are politics at play here. The White House is anxious to be seen as trying to curb costs for consumers as it faces midterm elections.

The overall strategy is broad. Apart from airlines and hotels, the administration wants to encourage more businesses to become involved, for example, in meat processing to try to generate more competition for the existing big four players in that sector.

The White House also has mobile phone charges in its sights. In particular the president hit out at what he termed “huge termination fees where they’re going to stop you from switching from a cell phone – you have one cell phone, you want to go to another – you want to go to another provider. Well, guess what? There’s an incredible fee you have to pay to terminate your, I mean – to terminate, you got to pay a fee to go to somebody else for a better deal.”