Daniel Webster College
 
A taxing situation
From airfare to hotels, advertised prices often don’t include extra fees
Sunday, July 16, 2006
THE COLUMBUS DISPATCH
 

Fly to Timbuktu for $200!" an ad screams. Is it too good to be true? Probably. First of all, flights from Port Columbus to Timbuktu are exceedingly rare. And then there are the add-ons: taxes, fees, destination charges. Often, advertised travel prices don’t include such extra charges, sometimes called "hidden fees." Taxes and fees on U.S. domestic airfares (which would not include Timbuktu) average more than 16 percent, according to a recent study by the MIT Global Airline Industry Program and Daniel Webster College. Travelers face similar add-ons for hotel rooms and rental cars. If tourism is an economic golden goose, then everyone, especially the tax man, wants to squeeze out just a little more pate.

"You’re facing four to eight taxes on plane tickets, one to three taxes on a hotel room and three to eight surcharges on a car rental," said Richard Lewis of Richard Lewis Travel in New Albany.

"For example, I sold a (plane) ticket to a lady yesterday. There were five taxes on top of the airfare. The ticket was $720 one-way, first class."

But with taxes and fees, her total came to $794. That extra $74 sounds like a lot, but it works out to a tax rate of 10.28 percent, less than the national average.

If a customer requests a rental car, "I’m going to tell you to add 20 to 25 percent right off the top" onto the basic daily rate for add-ons, Lewis said.

"And then with hotel taxes, you’re looking at anywhere from 7 to 18, 19 percent."

Columbus, with hotel bed taxes totaling 16.75 percent, has one of the highest rates in the country.

Travelers who book through a good travel agent should be told about these taxes and fees upfront, Lewis said. But be sure to ask.

Do-it-yourselfers can easily overlook significant add-on charges, especially when booking travel through the Internet.

Some Internet travel sites calculate and display total costs upfront, including giants Expedia, Orbitz and Travelocity. But others list tax rates in fine print, forcing consumers to haul out calculators to figure their own bottom lines.

Recently, hotelier Marriott International changed its Internet site, which now automatically adds fees, taxes and surcharges to the final price displayed for consumers.

"Now our customers know that what they see is what they get," said John Wolf, a Marriott spokesman.

The company isn’t concerned that some customers might compare the total Marriott price with the incomplete price at some other chain, Wolf said.

"Actually, I think it gives us a competitive advantage over those who don’t" calculate total costs, he said.

Guests who have been informed about taxes and fees will be happier at checkout, he said.

"And because they’re better informed, they’re more likely to come back and book with us.

"We want to be as transparent in our pricing as possible. And quite honestly, more and more (Web) sites are doing that now. That’s the direction that the industry is moving," Wolf said.

Unfortunately, taxes on travelers are increasing all the time, said Andrew Chamberlain, a staff economist at the Tax Foundation, a tax-policy research organization in Washington.

Chamberlain is researching a paper on soaring state and local rental-car excise taxes.

Travel taxes, such as those on rental cars, are "viewed as falling on visitors who can’t vote against them. And the rental-car industry is fragmented and not very powerful politically," he said.

Traditional taxes, such as property or sales taxes, are getting harder to raise, he said.

"So lawmakers are doing what anyone would do, following the path of least resistance."

Many locations are imposing rental car surcharges to pay for local projects such as stadiums and arenas that local taxpayers are unwilling to fund themselves, Chamberlain said.

"Politicians like to export taxes when they can. Travel taxes tend to do that. It’s bad economics but good politics."

The Web site Smartertravel.com lists 15 different kinds of taxes and surcharges that travelers might find added to their rental-car rates, including state and local sales taxes, convention center/stadium/arena taxes, parking taxes, airport concession fees and peak-season surcharges. (And that doesn’t include add-on insurance.)

Donna Wickerham, owner of the Only Way to Travel, a Reynoldsburg-area travel agency, said she’s no longer surprised by the number of taxes travelers face.

But taxes aren’t the only add-ons that travelers should beware, she said.

Cruise lines are notorious for the extra fees added at the end of the trip, she said.

For example, on most cruises, customers will be billed for the beverages, including soft drinks, they’ve consumed. And most cruise lines figure their own tips and add those to the bill, too, she said.

"That can be a shock when you get that $10 per person a night added on."

Shore excursions can result in another add-on fee.

Another thing people don’t think about is gratuities on tours, Wickerham said. "Should I tip the driver and guide? Customarily you do, but you should plan for that.

"We tell people that on a cruise, they’ve paid about 80 percent of their costs upfront."

But she has one cruise client who figures the add-ons at 50 percent and carries "pocket money" equal to the cost of the cruise.

"He counts on that, and so he never worries and is never surprised" by addon charges.

Lewis said cruise customers "think they’re buying an all-inclusive (vacation), but they’re not."

On the other hand, most "all-inclusive" resorts really are all-inclusive, he said.

"Which is why the all-inclusive, landbased resort experience has a bright future. You’re not nickeled-and-dimed to death."

But Wickerham said to watch out for so-called "resort fees," which can be an annoying, and surprising, add-on, in some locations.

"A lot of resorts in Hawaii charge those fees, which can be $10 to $12 a day. What do I get for this? Nobody can tell you. A daily newspaper, things like that. But that’s an expensive USA Today.

"We’re careful, and most of our suppliers are good about letting us know about the fees. But they have to be paid at the hotel."

New add-ons spring up all the time and can surprise even experienced travel agents.

Wickerham recently had booked package vacations for some customers when the package company notified her that it would be tacking on an additional $5-a-day "fuel surcharge." Such fuel surcharges are popping up at many airlines and cruise lines, she said.

Although travelers should always question add-ons and ask for bottomline prices, there aren’t many ways to avoid taxes and fees.

Wickerham said she knows some travelers who’ll cross into a nearby state or county to fill their tank where the gasoline tax is lower.

Lewis said many savvy travelers rent cars at downtown locations or at their hotels to avoid airport rental-car surcharges.

"But if you go downtown in L.A. to avoid that surcharge, you still have to pay a cab to get there."

Whether such strategies make sense "really depends on the customer," Lewis said.

For most travelers, the hassles aren’t worth the savings, Lewis said.

And that surely makes the folks collecting the extra money, from Columbus to Timbuktu, very happy.