Article: Resort fees can increase revenue for hotels

Hotels in 2018 could have added 6 percent to ADR with the fees

ADR for the hotels in 2018 in a CBRE Hotels Research survey was $232.18, according to an article from Robert Mandelbaum, director of research information services for CBRE. The addition of a resort fee would have increased ADR by 6 percent to $246.01.

U.S. HOTEL OWNERS and operators are looking at all potential sources of revenue beyond the rental of guest rooms.  Resort fees are one feasible revenue source that could make up for the shortfall, according to an article from Robert Mandelbaum, director of research information services for CBRE Hotels Research.

The national average growth for RevPAR for U.S. hotels will be less than 1 percent per year through 2021, according to CBRE’s December 2019 Hotel Horizons report.  STR said that the pace of RevPAR growth for US hotels has been decelerating since 2014 and the COVID-19 pandemic led to a dismal first half of March. Resort fees, intended to cover services such as fitness facilities, spas, pools, local phone calls, Internet access, airport transportation, and golf driving ranges, among other recreational facilities, could make up the revenue gap.

“At hotels that charged a resort fee in 2018, the associated revenue averaged 3.3 per cent of total revenue.  This ratio was slightly higher at resort hotels (3.6 percent) as compared to non-resort properties (2.8 percent),” Mandelbaum said. “Hotels provide several amenities and services that come with very legitimate costs.  Therefore, if communicated properly, guests should understand the required resort fee.”

The AHLA and STR survey found 6 percent of U.S. hotels charged a resort fee in 2018.  CBRE surveyed 6,300 hotels and found that only 4.8 percent earned resort fees in 2018.  When analyzed by property type, 50.8 percent of the resort hotels in the CBRE sample charged a resort fee, versus 2.8 percent for all other hotel types.

CBRE data mining of 306 properties that levied resort fees in 2018 shows that resort fee revenue increased at a CAGR of 10.9 percent.  This exceeds the concurrent CAGR increases for rooms revenue (2.8 percent) and total hotel revenue (4.3 percent).  Interestingly, resort fee revenue growth was greater at non-resort properties (12.7 percent) compared to the resorts in the sample (9.7 percent).

The CBRE sample survey indicated that without the resort fee revenue, the ADR for hotels was $232.18 in 2018. With the addition of the resort fee, the ADR would have increased by 6 percent to $246.01. A similar exercise would have boosted the ADR for resort hotels by 7.2 per cent, and non-resort hotels by 4.5 percent.

“If implemented properly, resorts fees are a prudent way to recoup expenses during austere times.  However, operators also need to balance the market impact of raising the defacto price to stay at the property,” Mandelbaum said.