Expedia just found out that the answer is yes. At least according to a Seattle Superior Court ruling.
The company was ordered to pay consumers $184 million, for hotel transactions February 18, 2003 to December 11, 2006. Part of the case revolved around the issue of taxes, as the attorneys for the plaintiffs claimed Expedia was claiming taxes on the retail rate, paying them on the wholesale rate, and pocketing the difference.
But a potentially more complicated issue involved Expedia’s claims on its site that its service fees covered costs. While the company said costs could include “a wide array of elements,” the judge stated that the plaintiffs “correctly concluded that profits, not costs, are the subject matter of these service fees.”
Expedia has since changed their language. In a long and convoluted section of their terms and conditions page, the company states:
The actual tax amounts paid by Expedia to the hotel suppliers may vary from the tax recovery charge amounts, depending upon the rates, taxability, etc. in effect at the time of the actual use of the hotel by our customers. We retain our service fees as compensation in servicing your travel reservation. Our service fees vary based on the amount and type of hotel reservation.
The whole service fee issue is complicated, especially as some online agencies are making a selling point of “no booking fees.” Most brick-and-mortar agents these days charge fees. Although some agents do not charge for packages and cruises where they are compensated by the supplier. And then there is the whole gray area of “net rates.”
When any agent gets a “net rate,” be it for a hotel or air ticket, there is a certain amount of freedom in how much to mark it up. And generally the markup is in lieu of a service fee.
But most agents I know agree, there is a huge difference in perception for clients between an included markup and a separate service fee. And markups are usually easier to sell. In an extreme example, a consolidator ticket to Europe might include a $300 markup, but if that ticket is lower than anything the client found on their own, the client will be happy. But the same client might squawk at the same ticket sold at net price, with a $150 service fee, even if the overall cost was lower.
Expedia, no doubt, has decided the same thing about hotel rates. Instead of selling the rooms at their cost, plus an announced service fee, they are setting the rate at a price they believe the market will bear.
But how about you, Tripso readers? Does it matter to you how much commission a travel agent, online or otherwise, might be making if the price is right? Or is transparency important?
Janice Hough is a California-based travel agent a travel blogger and a part-time comedy writer. A frequent flier herself, she’s been doing battle with airlines, hotels, and other travel companies for over three decades. Besides writing for Travelers United, Janice has a humor blog at Leftcoastsportsbabe.com (Warning, the political and sports humor therein does not represent the views of anyone but herself.)
