“Taxes are paid in the sweat of every man who labors.”
Travel-Related Taxes, Fees, and Other Charges
Over the past twenty years, particularly since 9/11, I have noticed a dramatic increase in charges (taxes and fees). Thirty years ago, these charges were 10-40% of what they are today. Now, they have become a major part of all Fifty Plus Nomad budgets. (Note: They are often, as you will see, hidden)
It is increasingly difficult to understand these charges because the number has also gone up. The names can also be quite confusing.
Nowadays, most websites will include all taxes (but not fees) in the airfare they quote you when you book airfare.
Sometime before you buy the tickets, you will see an accounting. These taxes will usually constitute between 5 and 50% of your total airfare, depending on where you go.
On some exceptionally low-cost flights, you may even pay more for these charges than for the flight! (Some taxes are based on the percentage of the fare; others are a set amount per flight, and some even depend on whether you fly Economy or First-Class)).
Of the 15 most popular destinations for American travelers, valuepenguin.com found that the UK charges the most at $209; Jamaica and the Dominican Republic are next at $158 and $146, respectively.
Taxes in Mexico and Canada constitute about 30% of the average airfare.
The USA’s additional charges range from approximately 15-40% of the airfare. (Generally, the lower the cost of the ticket, the higher the percentage of additional charges paid). The following is a list of the additional, typical charges in the US:
- September 11 security fee ($5.60 each direction).
- Passenger facility charge (varies, but capped at $4.50-$18 per flight. Funds Federal Aviation Administration activities).
- Federal domestic segment fee ($4 per flight segment. A flight segment is one takeoff and one landing.)
- Travel facilities tax (only applicable to flights to/from/between the continental US and Alaska and Hawaii).
- Immigration user fee ($3 for flights arriving from countries near the US and $7 for countries farther away. Not charged for domestic flights).
- Customs user fee ($2.97 for flights arriving from countries near the US and $5.89 for countries farther away. Not charged for domestic flights).
- APHIS (for agricultural inspections) user fee ($3.97 per flight. Not charged for domestic flights).
- Federal excise tax (8% on domestic flights)
Generally, most of these charges go toward:
- Improving airports.
- Airport security.
- Air traffic control.
- Tourist marketing and infrastructure.
- Occasionally, environmental mitigation.
A lot of travel experts believe that many governments divert these fees for other purposes as well.
When flying internationally, be aware that occasionally (less and less frequently), you will need to pay an additional charge at the airport before departing the country in Latin America. (Almost every airport imposes the tax. However, you usually pay the fee at the time of ticket purchase).
Unlike airfares, most hotel websites do not quote you the prices with these additional charges included. You often will need to wait until you are about to book the room. Then you will find out the full costs, including these additional charges. Some websites like hotels.com just let you know the final amount without detailing where the charges are going. (Hotels.com also includes an undisclosed fee for their services).
These additional charges are usually not included in the US and Canada, even when you make your booking. For example, if you book a room through Booking.com in the US or Canada, don’t be surprised that the quoted price does not include these additional charges. (Note: booking.com advises you in the small print of the charges you will pay at check-in at the hotel).
The amount of these additional charges in the US and Canada is usually between 15-25% of the room costs. These additional charges are “occupancy taxes or fees.”. You will also often pay these additional charges on Airbnb rentals as well.
In most other countries, the quoted price includes all the additional charges. Often you won’t know how much you paid in additional charges, even at check-out.
Occasionally, you will see value-added taxes, or VATs, listed on the hotel bill. (See here for the VAT definition). Usually, the VAT on hotel rooms is the same charged on most other items in that country. (VATs typically add 15% to 25% to the cost). Most of the time, it is just included in the price of the room.
Some European cities will charge a couple of Euros a day per person per night in local fees at check-in. Hotels usually indicate these fees on their websites.
Cruise Port Fees
Like hotels, most cruise companies and online travel agencies do not include port fees in the first price quoted. You will find out how much the port fees are only right before booking the cruise. You pay the fees, however, at purchase.
Typically, you will pay between 10 to 25 percent for additional charges. These charges include the following: baggage handling at departure and final destination, security, towboats, facility charges, etc. Generally, you won’t see any accounting for these additional charges.
Like most non-airline-related travel services, car rental websites usually do not include additional charges in their initial price quote. These charges add between 10 and 25 percent to most rentals. You will find out the full price when you make your reservation. Usually, you will have to pay the charges when you rent the car.
Travel Economics 101 Posts
Here are several posts designed to give Fifty-Plus Nomads a basic idea of how Travel Economics works. Being armed with a better economics education should make you a better travel consumer. (These can be read in any order)
- Why Alliances are Essential to Travel Providers. Are they Good or Bad for Consumers?Travel industry alliances are essential to the business´s survival. However, alliances have both good and bad implications for consumers
- Extra Fees: What are Ancillary (Extra) Fees and Why Are They Increasingly Becoming A Travel Industry Lifeline?More and more the travel industry depends on the sale of other products to expand and maintain its profitability. Expect to be bombarded with hints to buy other things (ancillaries) on your next cruise, flight, etc.
- The Internet Has Changed the Face of the Travel Industry More than Any Other Major IndustryThe internet has changed the travel industry probably more than another industry. This article discusses how these changes affect the consumer.
- Travel Industry Cost Saving Techniques: The Good, the Bad, and the UglyThe travel industry has made several changes to save costs in recent times. Some like using more fuel-efficient planes do not affect consumers that much. Others like reducing staff have made the experience worse for consumers.
- Business Travelers Versus Leisure TravelersThe travel industry gets most of its clients from leisure travelers. However, it makes more money from business than leisure passengers. The airlines put up with us leisure travelers because they couldn’t survive without us. However, they don’t hide their preference for business travelers.
- Why Are There So Many Connecting Flights? A Discussion of Why Airlines Love the Hub-Spoke Model More than ConsumersUnbeknownst to most consumers, the cause of most of our airline-related complaints is the hub-spoke model. Unfortunately, however, the hub-spoke model is also essential to the airline industry’s financial viability.
- Airline Schedule Changes: Why Don’t Airlines Keep their Promises?Learn why airlines change their schedules after you buy your tickets and what you can do about it.
- How Many Taxes, Fees, and Other Charges Do Consumers Pay For Airfare, Hotels, and Other Travel Services?The amount and number of travel taxes, fees, and other charges added to your bill will probably surprise you. Many are hidden and like everything else, taxes keep going up.
- Airline Consolidation: What Are the Disadvantages and Advantages For the Consumer?The airlines have consolidated so fast in the USA and Canada that only 5 players dominate the market. Learn what this means for consumers.
- Travel Industry Consolidations (Non-Airlines): The Effect on Consumers (Negative or Positive)?Probably the most significant change in the travel industry in the past couple of decades has been the industry’s rapid consolidation. Read this post to discover how few travel players really exist in the market today. and how this rapid consolidation has affected consumers.
- Why the Sharing Economy Has Become So Popular in the Travel Industry?The sharing economy like Uber and Airbnb has made a major influence on the travel industry and will continue to affect the industry far into the future.
- Third World and Chinese Travelers: The Biggest Future Travel TrendThe biggest change affecting the travel industry is the gigantic increase in emerging countries and Chinese travelers. These travelers will change the future face of tourism more than anything else.
- The 3 Reasons Travel Prices Are So Radically Different than Other Products: Perishability, Capital Costs, and Yield ManagementHave you ever wondered why travel products seem to be priced so crazily? Learn the three economic factors that contribute to the pricing of travel products: perishability, high capital costs, and yield management.
- Travel Economics 101: Learn How the Industry Works and Save Yourself Money and HeadachesPaul Heller, the Fifty-Plus Nomad founder, has developed a series of posts about travel economics. Reading these posts will help Fifty-Plus Nomads deal with some of the problems with the travel industry they are likely to encounter during their long-term, round-the-world journeys.