Successful Meetings - January 2008 - 152

Best Practices > MiGurus experts’ blogs from www.MiMegasite.com Words from the Wise THE TRUTH ABOUT RESORT FEES Let’s tackle the hated resort fee—a much maligned (and much misused) fee that has somehow managed to infiltrate a far broader range of properties than originally intended, and now is common at both resort and non-resort properties. Believe it or not, the original intent of the resort fee was actually a very creative solution to a problem resorts were facing—at least as it was first implemented here in the mountain resorts in Colorado. Due to the extraordinarily high cost of real estate in many mountain resort communities, the cost to build a Steve Collins new hotel property became Resort Meeting Source, LLC exorbitant—and far too risky Breckenridge, CO for any single investor. To combat this, many properties were turned into condominiums—whether their inventory was comprised of actual condominiums (with kitchens, and so on) or traditional hotel rooms. In many instances, from outward appearances there is no way to know that the hotel is comprised of condominiums—to you and me they look just like standard hotels, but each room has been sold to an individual owner. This spreads the cost and the risks across a much broader range of investors. With a condominium property, the owner of each room reaches an agreement with a management company (typically the company that runs all of the hotel operations, from front desk to housekeeping to reservations to common area maintenance) to rent out his or her room. The room revenue is then split between the management company and the owner. The management company pays all of its expenses for the actual running of the property out of their share of the split (typically 40-50 percent of the room rate, but in some cases, I have actually seen situations in which the management company takes as little as 20 percent). As more and more amenities (all of which, of course, cost additional money) became expected, a problem developed for many of the property management companies that run these condominium properties. Due to their split with the owners, in order to pay for new amenities that might cost, for example, $10 to provide, they would have to raise their room rates by $20 in order to increase their revenue enough just to break even on that $10 of additional costs (remember, the room owner gets 50 percent of every dollar of room rate on average). At the same time, non-condominium hotels could provide this same service simply by raising their rates by $10. This put the condominium properties at a significant disadvantage when competing with those traditional hotels. Since they had to raise their rates by twice as much as the actual cost to provide the added amenities, their rates soon grew to a level where they were simply no longer competitive with the hotel properties. Resort fees were born as a solution to this problem. Since a fee is separate from room rates, the management companies do not have to split this with the owners of the various rooms. This meant that, while hotels had to raise their rates by $10 to provide the additional amenities, the condominium property could keep its rates the same, and institute a $10 resort fee. This way they were able to remain competitive with the hotels both on pricing and amenities. In other words, there are actually some justifiable resort fees. The problem for us as consumers came about when hotels figured out what was going on in the condominium market, and that the general public had basically accepted the premise. Many hotels have seen this as an additional revenue stream and a way to raise their rates without actually appearing to do so. This bothers me because, in a traditional hotel, I have yet to see any justification as to why they should raise their rates via a resort fee (which, quite frequently, is not clearly disclosed in the booking process) as opposed to simply being up front and actually raising their rates. After all, “free” local phone calls, “free” internet access, “free” newspaper delivery, and so on, are all items that are not actually free if you have to pay for them in the resort fee. And, of course, since most of us travel with cell phones these days, how many “free” local phone calls do you make from your room anyway—$10 per day worth? I think not. —Steve Collins JANUARY 2008 SUCCESSFUL MEETINGS 152 mimegasite.com

http://www.MiMegasite.com http://mimegasite.com

Table of Contents for the Digital Edition of Successful Meetings - January 2008

Successful Meetings - January 2008
Contents
Editor's Note
Associations
Research
Events
Suppliers
Associations
On the Record
Associations
Suppliers
Planner Spotlight
Websites of the Month
Management Matters
Meeting the Law
Personal Success
Mouth for Sale
Food & Beverage
Professional Development
On Site
Pre-Event
Tools of the Trade
Veggie Power
Tennis, Anyone?
Seeing is Believing
The Wild Green Yonder
Game On
Places & Spaces
Galveston & Texas Beaches
Greater Seattle
Singapore
Gurus

Successful Meetings - January 2008