California Honest Pricing Law Attacks Resort Fees, Changes Cruise Pricing Nationwide – Live and Let’s Fly

California’s Honest Pricing Law forces companies to disclose all fees and charges but it’s having an effect well beyond its borders and its great for consumers.

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What “Honest Pricing” Mandates

California’s new Honest Pricing Law (SB 478) or Hidden Fees Statute is set to take effect July 1, 2024. The law aims to eliminate hidden fees and mandatory surcharges that are unavoidable in the process of the purchase. The easiest example is, of course, resort fees or the still more creative “destination charges” for properties that are nothing like a resort. These are unavoidable charges that add considerably to the nightly rate but allows hotels to compete against lower priced hotels that do not charge them by not listing them. That’s not really fair dealing to the customer and isn’t representative of the total cost.

California law SB 478 makes this illegal in the golden state.

“This is a transparency law, California Attorney General Rob Bonta said. ‘The law is simple: the price you see is the price you pay.’” – Seatrade

The California Department of Justice summarized it as follows:

“The law is “intended to specifically prohibit drip pricing, which involves advertising a price that is less than the actual price that a consumer will have to pay for a good or service.” Advertising or listing a price that is less than what a consumer will eventually be charged is a form of deceptive advertising that also violates existing state and federal law.” and;

“The law requires honest pricing. It prohibits businesses from “[a]dvertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges” other than government-imposed taxes or fees or reasonable shipping costs.” – California DOJ

Optional charges are not part of the mix. For example, Marriott has to include any resort fees, destination charges, mandatory housekeeping fees or whatever else cannot be taken off a bill, but it doesn’t have to include any ancillary charges like parking as it is optional. Airlines will continue to price as they are, compliant with federal law, because as essential as a carry-on bag or seat assignment might seem, they are not required to take the service.

It should come as no surprise that the good state of California has excluded its own mandatory costs from pricing – sales tax is not required to be included in the new pricing rule.

How Travel Brands Are Responding

Some hotel chains, in response to similar legislation in Colorado, and New York have already forced chains like Marriott to settle out of court and include such fees in pricing they present to customers. IHG and Hyatt have a similar policy, while short term homeshare giant Airbnb has a toggle to include fees for everywhere outside of affected jurisdictions but it is not default to show the whole cost.

The purpose of a resort fee is to hide the true cost and compete with lower priced properties while still collecting a higher nightly rate once the guest checks in or completes the purchase. Even if represented before they process the transaction, the guest has already narrowed their choice of hotels and would have to start the process over again aligned with their true budget.

In an interesting shift, most “contemporary” cruise lines which piece out many components of the fare have decided to include nearly all charges in their fare.

Note: Much like airlines that segment the cost, cruise lines to this point have priced the fare separately from taxes, fees, port charges, and gratuities.

Carnival Cruise Lines, the largest by ship volume (100) spread across nine brands including Cunard, Princess, and Seabourn has made California’s Honest Pricing the model nationwide regardless of departure, point of purchase, or traveler residency.

“‘Our total advertised price will now include all government-mandated taxes, fees and port expenses that we previously itemized separately for consumer awareness. While this is a California state law, we are making this change nationwide to ensure our advertised pricing is consistent no matter where guests shop for our cruises. Consumers and travel advisors will see the new advertised pricing starting on July 1.’” – Seatrade

Royal Caribbean, second by vessel volume (40) but almost twice the market cap of Carnival, has three affected lines: Royal Caribbean, Celebrity, and Silversea though the latter has always included those fees in its pricing and won’t need other make any changes.

MSC will be compliant with the law from June 26th; its Explora Journeys luxury line already includes these in the fare. Norwegian Cruise Lines with Oceania and luxury line Regent Seven Seas will also make the pricing policy nationwide. Viking and Disney have also made it clear they will be ready for July 1st.

Is This Enough To End Resort Fees Everywhere?

Marriott had to be sued into compliance but now resort fees are included in prices across the board and from the largest chains who followed their lead. Rather than comply solely with California, cruise lines have made the policy standard not only for the United States but for Canada too in most cases.

Perhaps the move is a unilateral act of goodwill but I suspect that these mega corporations surmised more states will add similar policies and rather than add rules all over the system, it’s cheaper and easier to simply adopt the most aggressive standard and make it uniform.

It’s possible that as states mandate these pricing practices, and the suppliers comply on a larger scale, other major markets will add similar requirements completely changing the pricing model for products in the travel sector.

What do you think?