A Fee too Far


A view of resorts on the  Las Vegas Strip.

My business partner, David, has an uncanny way of catching a wave (trend) before anyone else; he uses a simple measure, his own experience.  He uses the measure for buying stock, predicting the future of companies and just planning his own shopping, traveling and spending. So for example if he is trying to buy something online or over the phone and the process is too long, complicated and difficult he might predict the company will not have long-term success, once enough other people have like experiences.  And if he owned stock in the company he would sell it, if he did not, he would not buy any – simple.  It works better from him than for me, I can’t justify using my own experience and reactions to make generalizations about other people, my own tastes are not universal in any sense.  But for David it does work.

Recently we were talking about the problems in casinos and Nevada in particular.  As everyone knows – and today Nevada reported 5 percent less revenue for June than June 2009 – Nevada is struggling with the economic downturn; Nevada struggles more than most states because Nevada is more dependant on gaming and tourism than other states. We speculated on how long it is going to take before gaming, Nevada and Las Vegas in particular recover. I rehashed all of the old arguments about the draw of Vegas and how in the long run Vegas always comes back.  But David, as he always does, had a different perspective – he thought that Las Vegas (and many other places) was suffering from over-charging as much as from the downturn and that would make recovery more difficult and require a change in Vegas, not a change in the rest of the world.  He cited his own experiences with “resort fees” (there were others the price of water in the rooms, escallating food costs and the seemingly never-ending search for ways to charge customers more without them noticing) – his specific experience and complaint came not from Vegas but from Reno, however it still illustrated the point.

Hotels have begun adding on “resort fees” that is charging you for services they provide, but you don’t use. It annoyed him and he promised never to return to one hotel because it had refused to wave the fee even though the web site through which he booked the room guaranteed no additional charges.  Charging more for everything, but not giving more in return, including a choice in the options you might want and would be willing to pay for,  simply because they need more money is offensive to most of us, not just to David.  David simply saw it has a trend and predict financial problems for anyone not addressing the issue.

Well, today there was a story in the Las Vegas Sun about Harrah’s.  Harrah’s has stopped charging a resort fee and is advertising the change.  Harrah’s is using it to position itself against the other gaming companies that do charge the fee. We all feel the pain of those companies, their debt structure and business model were designed for much better times and they are struggling to service their debts.  Most of us have like problems, cars, houses or something we bought at the top of market and are struggling to pay for in today’s world of reduced income.  In someone’s wisdom the idea of resort fees was brilliant, profitable and without and downside – just charge everyone for the all of those resort amenities they had built and stood ready to provide should a customer want them, instead of just charging the people who actually use them – and no one would notice.  However, someone did notice, David noticed an it time many other people noticed, forcing Harrah’s to rethink its strategy.

To me the resort fee concept is analogous with raising taxes in bad times when everyone is making less and struggling to get along on what they make; the government too needs more money, but it has the power to simply raise the taxes and the taxpayer have to pay.  Could you go to work tomorrow and tell your boss (or customers if you own a business) you need more money and you were going to charge a “come to work fee”? I think not!

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August 2010
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