Hotwire & Priceline Service Fees: A Dirty Little Hotel Pricing Secret

by Michael on Jun 21, 2013 · 3 comments

Photo of Someone Telling a Shocking Secret

As I write this, we’re on vacation. While we’ll be spending a week at a lakeside destination, we’ve made several stopovers along the way.

Among other things, this has meant that we’ve needed hotel rooms. And guess what? Despite my previous anti-Hotwire rant, I actually used Hotwire to book our rooms.

What can I say? I’m a sucker for a good deal. And, in my defense, I’ve never had problems (knock on wood) with hotel reservations through Hotwire — or Priceline, for that matter. Just car rentals. Okay, enough rationalizing.

The point of this post is that, if and when you use one of these services, there’s something that you need to be aware of… As good as their prices look, they’re not quite as attractive as they might otherwise seem.

Sure, they undercut standard rates — sometimes by a significant amount. But then they tack on fees that narrow the gap. If you haven’t noticed these fees, I can’t say that I blame you. They lump them in with the taxes.

At Hotwire, this line item is called “Tax recovery charges & fees.” And yes, this amount includes the sales and lodging taxes associated with your reservation. But it also includes a tidy little profit for Hotwire.

When I ran the numbers, I discovered that these charges and fees amounted to ca. 24% of the room rate. For comparison, the actual tax rate for hotel lodging at this locale was 13%. That’s a pretty big difference, isn’t it?

For their part, Priceline calls this line “Taxes and service fees” and the numbers work out similarly. There’s roughly 10% in pure profit built into this fee.

Now don’t get me wrong. I don’t begrudge them a profit. After all, they’re not running a charity. But it seems more than a bit sneaky to advertise prices that are about 10% below what you’re really paying.

In some cases, you might actually wind up paying as much or even more with Hotwire or Priceline as compared to booking directly through the hotel chain, but with significantly worse terms.

For example, if you can get a $100 room for $90 through an aggregator, the extra fees make it a push (more or less). But, if you use the aggregator, you won’t get to pick the hotel brand in advance (though you can narrow it down with some sleuthing) and your prepaid reservation can’t be modified or cancelled.

In our case, we still came out far enough ahead that it was worth booking through Hotwire even after accounting for the fees. Just be aware that the deal you’re presented with isn’t all it’s cracked up to be. As always, buyer beware.

1 Harry June 21, 2013 at 10:17 am

After Hotwire cheated me I will never use Hotwire again. Hotwire gave me a Best Western as a 3.5* hotel. The all-in price with its inflated taxes and fees ended up being higher than the same hotel charged to any guest walking in.

2 Michael June 21, 2013 at 12:00 pm

Harry: Yep, that’s the type of situation I’m warning against. In many places, it’s possible to narrow down the hotels in a certain class and make sure you’re not overpaying. But that takes time, so you have to ask yourself if it’s worth the hassle.

3 Paul @ The Frugal Toad June 22, 2013 at 10:29 am

I used Hotwire on a trip to Vegas a few years ago and was surprised when I checked out to find a $25 resort fee added to my bill. It was in the fine print but it was pretty much impossible for anyone to find it, read it, and complete their online reservation. Not cool!

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