The hidden fees "drip-off"

Donald Trump versus Simon Calder. There was only ever likely to be one winner.

Thanks to The Independent’s indefatigable travel correspondent the £ 20 “resort fee” that Trump’s Scottish golf course, Turnberry, had attempted to impose on its guests has been pretty swiftly removed by its managers.

Simon’s hand was doubtless strengthened by the fact that such concealed-but-compulsory charges for things like wi-fi, swimming pool access, in-room coffee machines etc are actually illegal here in the UK.

And long may it remain so. This is one kind of American import against which we should resist as vigorously as Trump himself seeks to repel Chinese steel and Mexican-made cars.

A report commissioned by the outgoing Obama administration in 2016 notes that such sneaky fees in the American hospitality industry extorted more than $2bn (£1.4bn) out of Americans in 2015. Despite only being introduced in the late 1990s such fees have metastasised and now make up almost a fifth of the revenues of US hotels.

But before we get self-congratulatory about our enlightened proscription of resort fees, we might remember that considerable tranches of our own markets are also, and apparently quite legally, distorted by what’s sometimes known as “drip pricing”. 

On my way to Darlington from London on Virgin’s East Coast mainline last week I logged on to the train’s “free” wi-fi to discover that it was only complimentary for those who had booked their ticket directly through Virgin’s website, something I suspect very few of their customers actually do. So to get online for a couple of hours I had to fork out £ 5.

There are plenty of other examples of sharp selling. Those who hire a car at a UK airport will still often find all manner of unexpected compulsory additions wrung out of them upon arrival, such as insurance and refuelling. And of course there are those notorious excess baggage charges from airlines.

The tricks can be subtle too. An entire industry exists to create “strategic choice architecture” to exploit our psychological frailties over pricing. Sales assistants are trained to “upsell”, flogging everything from pointless insurance for small household electronics to extra fries with your hamburger. 

And have you noticed how clothing retailers’ seasonal “sales” now actually tend to cover most of the year? And why are printers so cheap, yet the replacement cartridges so expensive? 

Is it something to worry about though? Doesn’t it all even out in the end, as we get wise to the scams and tricks over time? Doesn’t the free market work its magic? 

Possibly not. The White House report into drip pricing concluded that such charges aren’t just an irritation, but do wider economic damage by interfering with the price signals that free markets need to function efficiently.

If you think a room is on sale at $80 you might consider it decent value and book it. But if you’d known the real price was actually $110 you might not have. Or perhaps you might have booked a different hotel with an all-in fee of $90. Yet if that $90 hotel had needed to compete with the headline prices offered by a dishonest one, it too might have had to conceal it’s own true room price, adopting a spurious resort fee of its own. And so on and so on. It’s easy to see how a market can quite soon become corrupted.

The rise of price comparison websites seems to have accelerated this race to the bottom on tariff opacity in some markets. As we do an increasing amount of our shopping and purchases online, this problem will likely grow. When people are making a decision on a one-off purchase remotely, based on headline quoted price, they are inherently vulnerable to exploitation.

Vendors should put their houses in order and ensure genuine price transparency. If they will not – or cannot – more will be expected of regulators. And the longer the “drip-off” continues, the heavier the hand of that intervention is liable to be.

#DonaldTrump #drippricing #hiddenfees #SimonCalder

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