Here’s an actual conversation I had at a hotel stay in the not too distant past:
Me: “What’s this $50 charge?”
Hotel Desk Clerk: “That’s the resort fee”
Me: “Oh, I didn’t use the resort, I just stayed in my room”
Hotel: “The resort fee is mandatory for all guests, sir”
Me: “Oh, then why isn’t that just part of nightly rate?”
Hotel: “It covers the amenities of the resort outside of your room”
Me: “Oh, I didn’t use the resort, I just stayed in my room” (You can see where this is going)
In the US we’ve gotten beat into submission with companies taking advantage of us. The example in this post is the REAL ACTUAL PRICE of a hotel in San Diego. I searched for a two night stay on Kayak, clicked the first option which said “$179”, then clicked next a bunch of times to check out. The final price? $460.62.
Where did all that extra cost come from? “Taxes & Fees”. Back in the day, I think the US government made a critical error when deciding how to apply sales tax. Instead of charging the BUSINESS the sales tax and have them include it in the advertised price (along with the rest of their costs), we got into this weird situation where the sales tax is added at the point of purchase. Not all countries do it this way. When I was in Australia, I had the delightful experience of sitting down at a restaurant and ordering a $14 burger. When my bill came, guess what it was. $14. I gave them $14 and walked out. (I may have tipped a dollar or two, but that’s also optional and less common in Australia).
Unfortunately, US businesses have seized this opportunity of the disconnect between advertised and paid prices. They figured, as long as we’re adding sales tax at the end, why not a bunch of our own junk fees too?! The appeal to businesses is great. Advertise a low price, get paid a high price. But it sucks for consumers attempting to price shop.
In my visit to the White House a couple weeks ago, this is what President Biden was addressing. He’s working to require transparency in advertising to eliminate junk fees! A worthy cause.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy
