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My Take On Resort Fees and Parking Fees

Discussion in 'Misc. Vegas Chat' started by Jordan R, Jul 28, 2016.

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  1. Jordan R

    Jordan R Newbie

    Jul 4, 2016
    Trips to Las Vegas:
    There has been a lot of discussion on here and other Vegas forums about why companies would charge resort fees and/or parking fees. Here’s my take on why MGM started charging resort fees and is now charging for parking:

    These days, most paid hotel reservations are booked on a 3rd party website such as priceline or hotwire rather than directly with the hotel. These websites take a percentage of the room charges as a commission. If customers pay the hotel directly, priceline doesn't get a commission, so MGM wants as many of the room charges to be paid directly to them as possible (ex. Parking and Resort Fees)

    Now let’s look at some numbers:

    Let's say someone books 7 nights on priceline for an MGM hotel (assuming no other fees) and the total for the week is $1000. Also, let’s assume Priceline takes 20%.

    MGM’s revenue = $800
    Priceline’s revenue = $200

    Now MGM decides to start charging $30/night for resort fees and $10/night for parking. The customer is still going to pay the same amount of $1,000, because MGM is going to lower the prices of the rooms accordingly. (Supply and demand laws say they must do this to maintain the same hotel capacity). Now the room is $720 for the week on Priceline, resort fees are $210, and parking is $70. Priceline now only gets to take 20% of $720 as a commission.

    MGM room revenue= $576 (80% of $720)
    MGM Parking Revenue = $70
    MGM Resort Fee Revenue = $210
    MGM Total Revenue = $856
    Priceline Revenue = $144

    By simply changing the name of the fee and without raising prices, MGM just increased their revenue by $56, or 8%, on this $1,000 purchase.
  2. Grid

    Grid VIP Whale

    Jan 17, 2011
    Trips to Las Vegas:
    While I don't disagree with the money end of it. I was always under the impression that this was done to lower rates, and thus be listed higher on these travel websites, without actually giving up any money by doing so.

    If MGM is $80.00 a night and Paris is $70.00 a night. Most people searching for a hotel online will change their view to show cheapest 1st. So MGM comes in and changes their rates to $65 a night (plus a $15 resort fee). They are now listed as cheaper, with nothing more than a blurb in the confirmation screen about the resort fee. So they will show up before Paris in searches.

    I'm just throwing these two names out there as an example. The same was being done post 9-11 for flights. These same travel sights listed them out by costs as well. So the airlines started charging for seats, carry-ons ETC. I believe the Feds had to step in and force them to disclose all of these fees upfront. They should do the same with rooms!

    People should know that these resort fees used to be minor. $7-$12.00. Once they learned that they can get away with it seeing $30+ per night is sadly the norm.

    Most nights the resort fee at Circus Circus costs more than the room itself!
    • Agree Agree x 1
  3. leo21

    leo21 VIP Whale

    Jan 9, 2010
    Chicago South Suburbs
    Trips to Las Vegas:
    That may be the way it works for Priceline but is it the same for all third party companies? My impression was that for some, they buy a block of rooms for let's say $40/night. However, they charge whatever the market will bear to the end user so the room they paid $40 could end up selling to the actual customer for $200 because that ends up being the going rate. MGM gets only their $40. But because of all the other fees, they now are making more money on that room, replacing the profit lost because they sold it early to a booking service.

    All that being said, they started doing this look cheaper in the search engines. When I started obsessing on Vegas, Harrah's wasn't very active in selling rooms third party or through foreign travel agents. As they started making acquisitions, they started doing more with third party agents. MGM was already aggressive selling rooms this way and the resort fee trick to lower their room cost started trickling out at their low end hotels. That's part of the reason third party companies to book sucks anyway. They don't let you know that the cheaper hotel is more rundown or in a crappier location. And at the time, it wasn't clear enough that you were going to end up paying more money because of fees for a lesser product.
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