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Bundled fees, a hornet's nest

LA TIMES: TRAVEL Q&A
Bundled fees, a hornet's nest
By: Laurie Berger
March 6, 2005

Originally Posted on http://www.latimes.com/travel/la-tr-qa6mar06,1,1428902.column?ctrack=1&cset=true


Question: I recently booked a stay at the Westin Resort & Spa in Whistler, British Columbia, through Orbitz and was charged 20% in taxes and fees. After the trip, I wrote to Orbitz for a refund of the 7% Canadian government tax. Orbitz told me it had already been "applied."

I was confused. Did I pay the tax or not? Am I due a refund, or did they keep it? Orbitz wouldn't explain the taxes and fees. Shouldn't travel websites be required to disclose these bundled charges?

Bruce Markoe
Culver City

Answer: Bundled charges are a hot topic.
Third-party websites routinely combine taxes and fees to avoid disclosing the pricing — and profits — behind their discount rates. Consumers should take these charges into account because they can add as much as 30% to the bill. Bundling also makes it harder to tell how much of that money goes to taxes or to the site's service fee.

Federal law does not require online travel providers to itemize these charges on a bill.

But some local ordinances require it. In Los Angeles, for example, "it's a misrepresentation to not break out taxes and fees," said travel attorney Al Anolik, author of "Traveler's Rights."

Los Angeles filed a class action this year against 18 online companies doing business with hotels in the city, which could test the legality of this practice.

But if rates are revealed, the deals will go away, said Arthur Sackler of Interactive Travel Services Assn., a trade group. Consumers, he said, care only about the total price.

Opaque pricing may work for third parties such as Priceline, where the rules are clearly spelled out, and consumers are more willing to trade price disclosure for cheap rates. But most online middlemen are not Priceline. They embed fees into their prices and do a "collectively poor job at explaining these policies to consumers," said Henry Harteveldt, a travel analyst with Forrester Research.

In Markoe's case, the numbers didn't add up. Of the extra 20% (or $471.44) charged to his reservation, 17% (including a 10% nonrefundable occupancy tax) should have gone to taxes. The remaining 3%, he assumed, was the website's fee.

Orbitz denied his request for a refund of the 7% Canadian goods and service tax and wouldn't tell him whether his rate was reduced by that amount or whether it kept the money.

His final bill didn't offer any clues, and Orbitz declined to answer.

Orbitz told us that our reader could apply for a refund. We also called competitors Expedia and Travelocity. All three were reluctant to discuss tax issues because of the pending litigation.

"You're currently scratching the surface of a huge iceberg that has implications across the country," said Paul Kiesel, an attorney for the plaintiffs in the lawsuit.

Pressed further, one of the third-party providers said consumers forfeit their refunds when they book Canadian hotels through these sites. That's because only hotels, not websites, can officially collect taxes. Consumers pay the equivalent of the 7% goods and service tax as part of their reservations. Websites pass those funds on to hotels.

Online bookers can't apply for a refund because the websites are not technically collecting taxes. In the end, Markoe lost a 7% refund for not booking directly with the hotel.

Both Expedia and Travelocity allude to this "tax recovery" policy in their user agreements, but they're difficult to understand. Only Expedia includes a disclaimer on the reservations screens, stating that the Canadian tax is not refundable.

Orbitz's disclosure is a two-liner that says customers are responsible for all taxes associated with the use of the site.

Then there are the service fees, which consumers don't pay if they book directly with hotels.

How can consumers shop smart and minimize their costs?

•  Those deep discounts on third-party sites are tempting, but they come with strings, namely service fees and other fine-print troubles. Often, the discount offsets the fees, but you won't know this without shopping around. And remember, when booking Canadian hotels, you'll lose an additional 7% off the top for taxes.

•  Beware bundling. Combined charges should be a red flag that you may be paying more than necessary. Call customer service for an explanation. If you don't get an answer, choose another Web provider.

•  Scour the fine print. Sites such as Expedia do a better job of disclosing taxes and other fees. If you don't see it, call and insist on an explanation.

•  If the price is right, go direct. You won't pay a service fee when booking directly with the hotel. All taxes will be itemized on the bill and you can recoup the 7% tax refund on Canadian hotels. However, to avoid getting hit at checkout with undisclosed service charges, such as resort fees, call the hotel in advance and ask about charges.

•  Report inconsistencies. If you think you've been overcharged on taxes or suspect excessive fees, report them to the state attorney general's office (www.naag.org, click on the link for "the attorneys general"). "Bundling looks like a new pricing practice, but it has not yet been litigated by our office," said Michael Hughes, a California deputy attorney general.

•  Double-check taxes and fees. Before booking with a third party, verify these charges with the hotel directly.
 
Laurie Berger welcomes your questions but regrets that she cannot respond to all. Send e-mail to travel@latimes.com or write to Travel Q&A, L.A. Times, 202 W. 1st St., Los Angeles, CA90012. Please include your name, city of residence and telephone number, which won't be published but is needed for verification.