As of May 12, 2025, the U.S. Federal Trade Commission’s (FTC) “Junk Fees Rule” has taken effect, mandating that hotels, vacation rentals, and other short-term lodging providers disclose all mandatory fees, including resort fees, upfront in their advertised prices. This regulation, aimed at eliminating deceptive “drip pricing” practices, is poised to reshape consumer behavior, hotel operations, and the broader hotel property market. Below, we explore the multifaceted impacts of this rule on the hotel industry, from pricing strategies to property valuations and investor sentiment.
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Enhanced Price Transparency and Consumer Trust
The new rule requires hotels to display the total price, inclusive of all mandatory fees, prominently at the first point of contact—whether on hotel websites, online travel agencies (OTAs), or third-party booking platforms. This shift addresses long-standing consumer frustrations with hidden resort fees, which often inflate the final bill by $20 to over $100 per night, sometimes exceeding 30% of the room rate. A 2017 FTC report highlighted that such practices increase consumers’ search and cognitive costs, making it harder to compare prices and make informed decisions.
By mandating upfront disclosure, the rule is expected to restore consumer trust, which could drive demand for transparent hotels. Properties that previously relied on low advertised rates to attract bookings may see a decline in conversions if their total prices appear less competitive. Conversely, hotels that already disclose fees transparently, such as Hilton, Hyatt, IHG, and Marriott, are well-positioned to capitalize on this shift, potentially gaining market share.
Market Impact: Hotels with high resort fees may face pressure to lower them to remain competitive, particularly in price-sensitive markets like Las Vegas, where fees are common. This could lead to a short-term dip in revenue for properties heavily reliant on fee income, affecting their profitability and, by extension, property valuations.
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Shifts in Pricing Strategies
Resort fees, which generate billions annually for the hotel industry, have historically allowed hotels to advertise lower base rates while recouping costs for amenities like Wi-Fi, pools, or parking. With the new rule, hotels can no longer hide these fees, forcing a reevaluation of pricing models. David Sherwyn, a hospitality professor at Cornell University, notes that hotels may respond by raising base room rates to incorporate fee revenue, potentially charging per person or adjusting rates based on occupancy to maintain revenue streams.
Alternatively, some hotels may eliminate resort fees altogether, bundling amenities into the room rate to simplify pricing. Brands like Choice Hotels and Best Western, which typically avoid resort fees, may gain a competitive edge in budget-conscious segments. However, for luxury or resort properties, maintaining fees for high-value amenities (e.g., spa credits or dining vouchers) could still appeal to guests if transparently disclosed.
Market Impact: Properties that adapt by offering all-inclusive pricing may attract more bookings, particularly from loyalty program members who value transparency. However, hotels that raise base rates risk losing price-sensitive customers, potentially impacting occupancy rates and revenue per available room (RevPAR). This could lead to softer demand in oversaturated markets, affecting property cash flows and investment appeal.
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Operational and Marketing Adjustments
The rule applies not only to hotels but also to OTAs, metasearch sites, and short-term rental platforms like Airbnb, ensuring a level playing field. Hotels must now invest in updating booking systems, training staff, and revising marketing materials to comply with the regulation. For smaller or independent properties, these compliance costs could strain budgets, particularly if they lack the technological infrastructure of larger chains.
Moreover, hotels may need to rethink how they communicate the value of amenities covered by resort fees. The American Hotel & Lodging Association (AHLA) argues that only 6% of hotels charge resort fees, and these properties offer significant amenities that justify the cost. Clear disclosure of what fees cover—such as pool access, shuttle services, or dining credits—could help mitigate guest pushback and maintain perceived value.
Market Impact: Larger hotel chains with robust systems are likely to adapt more quickly, potentially widening the competitive gap with smaller operators. Properties that fail to effectively communicate amenity value may see reduced guest satisfaction, impacting online reviews and long-term brand equity, which are critical for maintaining property desirability in the market.
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Influence on Property Valuations and Investment
The hotel property market is sensitive to changes in revenue potential and operational costs. Resort fees have been a significant revenue driver, with the industry earning approximately $3 billion annually from these charges. Properties in high-fee destinations like Las Vegas, Florida, or New York, where fees can exceed $50 per night, may face downward pressure on net operating income (NOI) if they reduce or eliminate fees to stay competitive.
For investors, the rule introduces uncertainty. Properties with high fee-to-room-rate ratios, such as some Hilton or IHG hotels (averaging 4.6% and 3% of room rates, respectively), may see compressed profit margins if fees are absorbed into base rates. This could lower capitalization rates and property valuations, particularly for resorts or urban hotels reliant on fee income. Conversely, properties with minimal or no resort fees, such as many Wyndham or Best Western locations, may become more attractive to investors seeking stable cash flows.
Market Impact: Investors may prioritize properties with transparent pricing models and lower fee dependence, potentially driving acquisition interest in mid-tier or budget brands. However, high-end resorts with unique amenities could maintain value if they justify fees through premium offerings, appealing to affluent travelers less sensitive to price.
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Regional and Segment-Specific Effects
The impact of the rule will vary by region and hotel segment. In destinations like Las Vegas, where resort fees are nearly ubiquitous, the rule may lead to a market-wide recalibration of pricing, with some properties absorbing fees to compete on total cost. In contrast, markets with fewer fee-charging hotels, such as rural or suburban areas, may see minimal disruption.
Luxury and resort properties, which often charge higher fees for premium amenities, may face less backlash if they clearly articulate value. However, mid-range or urban hotels charging “destination fees” for basic services (e.g., Wi-Fi or local calls) could lose favor if guests perceive these as unjustified. Short-term rentals, now also subject to the rule, may see increased scrutiny of cleaning or service fees, potentially leveling the competitive landscape between hotels and platforms like Airbnb.
Market Impact: Markets with high fee prevalence may experience short-term volatility in occupancy and revenue as consumers adjust to transparent pricing. Properties in competitive urban centers could face tighter margins, while rural or budget hotels may see stable or increased demand from cost-conscious travelers.
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Long-Term Implications for the Industry
While the rule does not ban resort fees, it aligns with broader consumer protection trends, such as California’s 2024 ban on drip pricing and proposed federal legislation like the Hotel Fees Transparency Act. These efforts signal a shift toward greater accountability, which could eventually lead to stricter regulations or outright fee bans, as seen in parts of Europe.
In the long term, hotels that proactively embrace transparency and innovate their pricing models—such as offering flexible, amenity-based packages—may strengthen their market position. The rule could also spur consolidation, as smaller operators struggle with compliance costs and larger chains leverage economies of scale.
Market Impact: The hotel property market may see increased merger and acquisition activity as brands seek to consolidate market share. Properties with strong brand loyalty and transparent pricing could command premium valuations, while those slow to adapt risk becoming less competitive, potentially leading to distressed sales or repositioning.
Conclusion
The FTC’s Junk Fees Rule marks a pivotal moment for the U.S. hotel industry, compelling properties to prioritize transparency in an era of heightened consumer scrutiny. While the rule may pressure revenue streams for fee-reliant hotels, it also offers opportunities for brands to differentiate through honest pricing and value-driven offerings. The hotel property market will likely experience short-term turbulence as operators adjust, with potential declines in valuations for high-fee properties and increased investor interest in transparent, fee-light models. Over time, the rule could foster a more competitive and consumer-friendly market, benefiting properties that adapt swiftly and strategically.
For hoteliers, the path forward involves balancing revenue needs with guest expectations, leveraging technology to streamline compliance, and communicating the value of amenities to justify fees. For investors, the focus will be on identifying properties with resilient pricing strategies and strong market positioning. As the industry navigates this transition, the rule underscores a broader truth: in a digital age where comparison shopping is king, transparency is no longer optional—it’s a market imperative.
