“With the price of life these days, you’ve got to get everything for free you can.”
Why Travelers are Pressured to Buy Additional Travel Services
This blog was written before the COVID Pandemic. The COVID epidemics played havoc on the travel business. In 2022, Fifty Plus Nomad decided to focus on traveling and living in Mexico and language learning posts. We will only update these long-term travel-related posts on a time-permitting basis. We would appreciate your comments and updates on these posts.
In addition to travel tax and fees, the travel industry relies more heavily than most industries on additional (ancillary) fees and services. Ancillary fees are optional charges for additional services offered by cruises, airlines, hotels, or car rental providers.
Remember that the travel industry can sell these items so vigorously that you think they are required. (I would argue that the airline cancellation/change fee and the cruise ship gratuities* seem mandatory to me).
In addition, if you spend too much on ancillary products, it can stifle your budget. (Want to see proof of the impact of these fees on passengers’ budgets, watch what happens in the purser’s office on a cruise ship the day before the cruise ends).
* The cruise industry argues that the gratuity is not mandatory because passengers can request that cruise ship gratuities be removed
The Importance of Additional (Ancillary) Travel Fees
Even with all the emphasis on yield management, very few travel businesses survive just by selling seats on a flight, renting a room in a hotel, etc. The industry’s profit and revenue come from selling other services and fees.
A 2018 study of fifteen airlines found that fees (called ancillary revenue) represented 17% of the airline’s average operating revenues. The same study also found that the surveyed airlines experienced a 23% annual growth in ancillary fee revenue between 2017 and 2018. (Ancillary fees represented a higher percentage of income for budget carriers, like Ryan Jet, and a lower percentage for legacy carriers, like Delta).
I have not seen a similar analysis of how vital these fees are for maintaining the profitability of non-airline-related travel businesses. However, I feel confident they are a significant and growing source of profitability. Why? Travel providers usually do not have to pay much to provide ancillary services, but they can charge a lot.
The Future of Ancillary Travel Fees
Consumers can see many signs of the growing importance of fees to the travel industry, including the following:
- The growth in the number of fees.
- The travel industry’s willingness to impose fees for services that used to be free.
- The increasing costs of these fees over the last several years.
Consumers can avoid most of these fees by not using the services. Nowadays, however, some of these fees- like baggage fees-are difficult to avoid. (After all, most people need to travel with more clothes than they can put in their carry-on bags).
Remember, travel industry professionals, particularly on cruise ships, receive many incentives to sell these added services. If you succumb to these promotions (as I have at times), it can severely strain your budget.
Here are some of the most common consumer-related, ancillary charges and services that the travel industry provides:
Cruise Lines Ancillary Travel Fees
- Cruise lines make the bulk of their profits through selling ancillary extras, including:
- Alcoholic beverages.
- Specialty restaurants.
- Shore excursions.
- Gambling casinos.
- Art auctions.
- On-board stores.
- Phone services.
- Gratuities for the staff. (Cruise lines add 15-18% gratuities onto most onboard services. They also charge $12-$18 daily for waiter and maid services. Gratuities are not part of the initial price of the cruise).
Note: This is true unless you go on an expensive luxury cruise with few additional charges.
Airline Ancillary Travel Fees
Airlines have added many ancillary extras in recent years for such ¨amenities¨ as:
- Meals and alcoholic beverages.
- Selecting your seats in advance
- Check-in baggage.
- Some airlines even charge now for cabin baggage.
- Some airlines charge you for printing a boarding pass (Easy Jet in Europe).
- Spirit Airlines even tried several years ago, charging for using the bathroom!
- Airlines (and some cruise ships) in the mid-2000s until the mid-2010s added a fuel surcharge to address their loss of income from higher fuel costs.
- Perhaps the most consumer-unfriendly airline ancillary fee involves changing tickets. (In 2012, these charges accounted for almost half of many airlines’ profit margins). Consumer advocates say the penalty is excessive (usually between $200 and $500). Airlines argue that these charges help avoid traveler no-shows and limit customer changes. Consumer advocates counter by saying airlines usually resell these seats but collect the penalties when passengers change flights far in advance. Some suggest airlines charge smaller fees for changing flights long before departure.
Hotel Ancillary Travel Fees
Though most mid-range hotels do not charge a lot of ancillary charges; some hotels, particularly more high-end properties, charge for some of the following additional extras:
- Resort services.
- Drinks and snacks from in-room mini-fridges.
- Pay-per-view movies.
- Early and late check-in.
- Wi-fi access and use of in-room phones.
- Airport shuttles.
- Gratuities for bellhops and housekeeping staff.
- Cancellations; (fortunately, these are less common than with airlines).
- Energy surcharges.
- In-room safe.
- Luggage holding.
- Holding packages at the front desk.
Ancillary Travel Fees: Rental Car Companies
- Rental car companies are the worst offenders in the ancillary game. They are notorious for both gauging customers and adding undisclosed fees. Here are some of the more common fees that rental car companies charge for include:
- Early and late return. (I was once charged $40 for dropping off a car two hours before I indicated when I picked up the car).
- Additional authorized driver.
- Frequent traveler program.
- Lost keys.
- (Often high) dropping off a car anywhere other than where you picked it up.
- GPS and baby seats.
- Airport concessions.
- Miscellaneous car-related ¨services¨ such as vehicle licensing and tire recycling.
Ancillary Travel Fees: Travel Insurance and Other Revenue Sources
Tour companies, cruises, travel agents, and airlines make much of their income from selling travel insurance. They get massive commissions (often up to 50%), and it is easy to sell insurance. (Most agents sell the services by having a story of a past client who benefitted from having travel insurance. They never mention that long-term travelers, like me, can afford to pay for an entire trip just by never buying travel insurance. That said, it is worth purchasing travel insurance if you are genuinely likely to cancel a trip due to illness or family emergencies).
Other Revenue Sources
The travel industry receives much ancillary income from sources other than customers. Airlines, for example, receive about 60 percent of their revenue from consumers directly and the other 40 percent from:
- Selling frequent-flier miles to credit card companies (which the credit card companies, in turn, award to clients as an incentive to use airline-branded credit cards).
- Repairing aircraft.
- Cargo (particularly profitable on some routes).
Want to Know More About Ancillary Travel Fees?
Check out this article from the Professional Hobo.