“Whether buying tickets to a concert or sporting event or booking a vacation or a hotel, Californians deserve to know exactly how much they’re being asked to pay, and not be surprised later by hidden junk fees,” said California Senator Nancy Skinner (D-Berkeley) in regard to a proposed bill she coauthored called Senate Bill 478 (SB 478), which has since been enacted and just took effect in the state earlier this month.
Designed to protect consumers from hidden fees, businesses and sellers must, as of July 1, 2024, list the price of any good or service to include all mandatory charges or fees. Businesses and sellers will be in violation of the law if they advertise a price lower than the final amount the consumer is required to pay for a good or service.
Simply put for hotels, the price displayed to consumers at the time of booking must match the final price paid for the room.
This law will most certainly impact hotels that advertise a room rate up front but then impose various, unexpected or “surprise” mandatory charges later in the booking process. Some of the most common types of hidden fees that hotel guests may encounter include early check-in or check-out, parking, minibar restocking, Wi-Fi access, resort, destination, urban, and online booking fees.
Also worth noting, SB 478 is not a price control law; rather, it is designed to encourage transparency in hotel pricing. A hotel may determine its room rate, as long as the rate discloses all the various mandatory fees and charges that will ultimately be paid by the guest upon booking. Contingent or optional fees, such as pet fees, or incidentals like in-room movie purchases, do not need to be included in the upfront advertised rate. The listed rate also does not need to include taxes or government-imposed fees such as sales tax.
With the release of the 12th Revised Edition of the Uniform System of Accounts for the Lodging Industry (USALI), hotel owners, management companies, operators and properties are seeking clarification on the classification of fees that must be considered when determining the Average Daily Rate (ADR). How does SB 478 impact how fees are reported in compliance to the USALI?
As set out in the USALI, 11th Revised Edition, resort fees are classified as Miscellaneous Income (Schedule 4); therefore, these fees are NOT part of Room Revenue or Other Rooms Revenue, and do not impact the calculation of ADR. The recent changes in California laws are strictly based on disclosure (transparency) of fees paid by guests and not the way those fees are reported in a hotel’s P&L statement.
Importantly, guidance on resort fees in the new release of the USALI 12th Revised Edition, with a compliance date of January 1, 2026, remains unchanged. Of note in the Miscellaneous Income Department, Resort Fees have been changed to Destination, Resort and Urban Fees. Learn more about how to access the USALI 12th Revised Edition at usali.hftp.org.
The text for SB-478 Consumers Legal Remedies Act can be found here. Answers to frequently asked questions (FAQs) can also be found here.
