Hotel and Airbnb price tags may soon spike. For travelers, that's a good thing (2024)

If you’re making travel plans for summer or fall, brace yourself for a jump in some advertised prices — which is, believe it or not, good news for consumers.

It’s the result of a new California law aimed at bringing transparency to the resort fees, service fees, host fees and other “drip pricing” that often inflates consumer’s bills beyond the rates first advertised, especially at lodgings and restaurants. Under the California law known as SB 478, which takes effect July 1, businesses selling their wares in California now must include mandatory fees in their initial advertised prices.

“The price you see is the price you pay,” California Attorney General Rob Bonta has said.

The law has gotten a lot of attention for its potential effects on struggling restaurants, many of which have imposed service fees since the arrival of the pandemic. (In fact, one legislator has proposed an eleventh-hour exception to exclude restaurants.) But the law also brings big changes for travelers and that industry — especially when it comes to the “resort fees” that many hotels automatically charge, saying they cover services and amenities such as pool and gym access.

By putting a separate label on those fees, hotels have been able to advertise lower daily rates — an advantage when consumers are comparing prices. Now the hundreds of U.S. hotels that have been tacking “resort fees” onto their daily rates will be required to include them in the advertised rates that California consumers see.

At a consumer’s first glance online, it may seem the new rules have pushed the cost of a $149 room up by $20 to $50 per night. In fact, the hoteliers are just disclosing all pre-tax fees up front, as required — a change that may allow consumers to make better cost comparisons.

Cleaning fees should show up sooner

Meanwhile, the same law requires vacation rental hosts to include fees for service and cleaning from the beginning.

This follows an initial voluntary step taken by Airbnb in 2022. Under pressure to be more transparent, the company added a digital “toggle” switch allowing customers to initially see either a basic daily rate or a total showing how much those secondary fees would add to the daily rate. Now, Airbnb officials have said, customers in California will automatically see the “total before taxes” number.

In practice, the new requirement means that instead of quoting a $150-per-night rate to some search-page visitors, an Airbnb host would need to tell all consumers up front that the five-night rental will cost $1,050 (the $150 daily rate plus $150 service fee and $150 cleaning fee) — effectively $210 per day, before taxes. This will cover any destination being considered by a California-based consumer, an Airbnb representative said.

The vacation rental company VRBO shows consumers two prices on its browsing pages: the basic nightly rate in larger bold type and the total price in smaller, plain type, no toggling needed.

Though the new law is aimed at any business selling to Californians, many businesses beyond the state may not comply immediately. If you’re planning a trip outside California, check closely to see what costs your prospective lodging is and isn’t disclosing. (But if you’re headed to a country within the European Union, no worries: The E.U. already requires businesses to advertise using their total cost, including taxes.)

“This is all about uncovering the hidden fees that are everywhere in our economy. It’s pretty sweeping,” said Jamie Court, president of Los Angeles-based Consumer Watchdog. He noted that if offenders ignore warning letters, they can face penalties of $1,000 per violation (potentially including other damages and attorneys’ fees).

Though this change will disrupt some hotels’ strategies for boosting profits, the changes also may give hoteliers a better chance at winning back customers from short-term rental companies, which have grabbed a hefty share of the travel market since the birth of Airbnb in 2007.

Lynn Mohrfeld, president and CEO of the California Hotel & Lodging Assn., said the group supported the legislation in Sacramento because it should bring “a level playing field” between hotels and the vacation rentals. “If everybody does it the same way, it’s makes it a better buying experience for the consumer.”

The California law is unlikely to change base rates for airlines or rental cars, industry experts said, because the add-on fees those businesses charge are typically for voluntary services and items, such as preferred seats and insurance.

California Atty. Gen. Bonta has noted the transparency law doesn’t raise or lower any prices, but it does require more clarity and is intended to curtail “junk fees” and “drip pricing.”

How resort fees got to be enormous

Though many hotels do not charge resort fees, the practice has grown dramatically since the late 1990s, especially in vacation destination areas like Las Vegas, Palm Springs and San Diego. The fees typically range from $20 to $50 nightly.

By one estimate, the U.S. hotel industry in 2017 reaped $2.7 billion in resort fees. Lauren Wolfe, counsel for the consumer advocacy group Travelers United and founder of KillResortFees.com, has called resort fees “the most deceptive and unfair pricing practice in the hotel industry.”

As consumer sentiment against the fees has grown, public officials have filed several court challenges nationwide, including a lawsuit against Marriott International by Pennsylvania’s attorney general. That suit led to a 2021 settlement, which led to Marriott’s announcement in May 2023 that it would start including resort fees in initial website search results. Hyatt followed with a similar change in July 2023, Hilton in September.

In 2023, President Biden denounced resort fees and the Federal Trade Commission proposed a rule targeting junk fees and related practices. A Junk Fee Prevention Act was introduced to the Senate in March 2023, followed by a Hotel Fees Transparency Act in July, but so far, Congress has taken no action.

Meanwhile, some questions remain about how the travel industry will respond to California’s transparency law. For instance: What about companies that continue to advertise the lowest version of their rates in large type, while simultaneously disclosing the large true full price in smaller type?

“That seems to violate the intent of the law,” Court said, but “It’s up to a court to figure out. Companies are going to push to the limit.”

For those ready to make hotel or rental property reservations, a second new state late could also be helpful: Beginning July 1 under legislation known as SB 644, California consumers must be given 24 hours to cancel most lodging bookings without any charge, so long as the consumer has made the booking at least 72 hours ahead of arrival. The law includes hotels, rental agencies and third-party booking services.