[Your author Robert here… I was pondering whether this was more soft topics for my tech blog, or travel. I’ll crosspost, since I think it applies to both. And it sat around in my draft folder for about six months, but it’s still valid today.]
I recently dined with my honey at a local chain steakhouse. I’ve been going there as often as weekly for over a decade. We’ve gone less frequently in the last couple of years thanks to Nom Burger, but still once a month give or take.
Their prices have been sneaking up over the years. The dinner for two combo they have has gone from under $40 to $65 as I recall, although coupons still bring it down. Some of the choices have become added-cost items, so if you want a wedge salad, that’s an extra buck, and if you’re lucky it won’t be smaller than it was last month.
But the thing that annoyed me was the 3% “minimum wage surcharge” that was stickered onto the menu and was slapped on the bill.
Slapping customers with your cost of doing business?
When I see a “minimum wage surcharge” or a “health insurance surcharge” on a restaurant bill, it rubs me the wrong way in a big way. It tells me the restaurant would really rather not pay a reasonable (legal) wage, or would rather not provide health insurance (maybe they’d rather have sick employees serving and cooking for customers?).
And a separate item could lead to lower tips as well. If you look at the subtotal to calculate the bill, 3% of that amount which is actually part of the cost of business is not included, so you may not think to tip for it. I didn’t think to look at whether the surcharge was taxed… is tax avoidance part of the consideration as well?
It wouldn’t be too hard to add 3% to the menu items themselves. If you were able to reprint the menus for the 5-10% price hike on certain items, you could easily add the 3% in rather than adding a sticker.
You’d also see a bit more money going to the employees you are hesitant to pay fairly or insure too. Sure, 20% of 3% isn’t a lot per cover, but over time it adds up.
It can’t just be surcharges bugging you…
As I pondered this particular sticker, I thought about parallels with fuel surcharges (for shipping and airline tickets) and resort fees (for hotels and, well, resorts).
The fuel surcharges seem similar; given the dynamic nature of pricing for airline tickets, it should be easy to adjust in a close-to-realtime fashion based on actual costs of fuel (or even to buy fuel more than a gallon at a time to absorb market shifts, which I think they do anyway). Shipping costs could be more complicated due to contracts with shippers and agencies.
Resort fees make them all look friendly and nice, of course; $30+/night for wifi and printing boarding passes is a bargain if you’re printing a thousand boarding passes, but more often it’s a great way to fleece customers and get away with false advertising. (Read some thoughts from The Points Guy and KillResortFees.com here.)
If you travel a lot, especially to Las Vegas, you’re accustomed to the resort fees, which as TPG above notes can be more than the room rate itself at cheaper hotels. But first-time travelers, especially those not on company expense accounts, may be disappointed and/or inconvenienced when their $30/night hotel room turns out to be $65+tax. Make it $100 if you have to park a car.
If you as a hotel operator believe that the resort fees reflect anything of actual value, why not either include them in the room rate, or make them optional? Surely all the people who find those services valuable will be happy to pay for them. Myself, I haven’t needed a notary or fax receiving at a Las Vegas hotel, well, ever… and based on Amex Fine Hotels & Resorts credits at several hotels, I know the wifi is worth $5 a day, and I’d pay that happily.
There’s a good read at the Federal Trade Commission’s website on their investigation into resort fees. The tl;dr summary (emphasis added):
The analysis in the paper finds that separating mandatory resort fees from posted room rates without first disclosing the total price is likely to harm consumers by increasing the search costs and cognitive costs of finding and choosing hotel accommodations. The analysis finds that separating resort fees from the room rate without first disclosing the total price is unlikely to result in benefits that offset the likely harm to consumers.
However, to date not much has been done to address this, and resort fees continue to go up.
There are ways to get around some resort fees, of course. Caesars Entertainment does not automatically charge resort fees for Diamond and Seven Stars Total Rewards members, for example, and if you’re a high roller/have a host at other resorts and chains in Las Vegas, you might be able to get special treatment. But most visitors to Las Vegas will get slapped with a resort fee (and parking fees too!) that they get little or no benefit out of and no option to decline.
How do you feel about surcharges and fees? Do they affect your choice of destination? Or do you just consider them “part and parcel” of traveling and dining out? Share your feedback in the comments.