Rafi Mohammed

When in Rome...Should Caesars Palace Charge Resort Fees?

Posted on May 16th, 2011 (1 Comments)

Resort fees are annoying. Often not advertised, unsuspecting travelers arrive at their hotel only to be notified at check-in of a $20 per night mandatory resort fee. To ease the pain, front desk clerks tick off the benefits included in the resort fee such as “complimentary” Internet, local phone service, health club, and perhaps a bottle or two of water. Usually included in this rote explanation is the fact that “most other local hotels charge resort fees too.”  Since these charges were once a la carte but now mandatory, resort fees are a hidden component of price. In essence, the nightly lodging price is being parsed out as room charge plus obligatory fee to cover services that some of us once paid for.

While most casino resorts in Las Vegas and Atlantic City charge resort fees, Gary Loveman, CEO of Caesars Entertainment, refuses to implement them at his company’s hotels. Of course, some travelers (who don’t use these extra services) may appreciate this stance, others probably don’t. At Caesars, 24 hour Internet access is $14.99 and entry to the gym is $25 per person daily - seems a bit steep, doesn’t it? Thus, a couple could easily rack up $65 in charges per day by using the gym and Internet.  

Assuming that Caesars’ properties charge comparable prices to other resorts, in essence its pricing strategy amounts to room fee plus “you only pay what you use” (albeit at high a la carte prices).

So let’s calculate the potential lost profits associated with this pricing strategy. Caesars operates close to 30,000 rooms in Las Vegas and Atlantic City. Let’s be conservative and say that in essence, it is losing out on collecting a $20 resort fee on 10,000 rooms per night. Why am I not counting on a $20 fee from all 30K rooms? Occupancy is not 100%, some rooms may be comped to gamblers, and some people end up paying a la carte fees for the Internet and gym.

The resulting missed profits are in the ballpark of $73M annually, which is not chump change. And for Caesars, every dollar counts: the company lost $831M in 2010 and is ranked #16 of the 20 biggest money losers of the Fortune 500 in 2010.

So what do you think? When in Rome, I believe that Caesars Palace should charge resort fees.

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Readers' Comments on This Blog Entry

From Rebecca on June 13th, 2011
I thought Caesars Palace in Atlantic City does charge resort fees, even for a comped room?