Hotel chains hide VAT fees

Do you expect to see the full price when you search for hotels online? We found many UK hotel chains breaching government guidelines and advertising rules by not including VAT in headline prices online.

Personally, once I’m on a hotel chain’s website and have found the dates I want, I expect the full and final price I’m going to have to pay to appear immediately.

I certainly don’t expect to see a price that’s a sixth cheaper than the actual amount I’ll have to pay. Yet, that’s what Which? Travel found happens with many hotel chains operating in the UK.

We looked at 24 hotel chains to see which of them included the 20% VAT in their headline prices, as Advertising Standards Authority (ASA) rules and government guidelines say they must do. The guidelines from the Department of Business Innovation and Skills state:

‘All prices given to consumers by whatever means, should include VAT. This total price must be displayed prominently so that consumers can see it.’

We decided to investigate the hotel sector after the ASA upheld a complaint that VAT-exclusive prices on websites of Intercontinental Hotels Group and its subsidiary Crown Plaza were misleading and breached the ASA code. ASA has ordered IHG to change its practices.

Unfortunately in our snapshot of London hotels in July we found hotels in 11 of the 24 chains were displaying prices that didn’t include VAT in the first price that was shown. Several hotels didn’t add it until the payment page.

For instance, Hilton and Doubletree added it at stage four of a five-stage booking process. A Hilton Worldwide spokesperson told us it was changing its website so that VAT-inclusive prices are displayed in countries where required by law.

You shouldn’t have to lose sleep over unclear hotel prices

Hotels argue that because many of their competitors don’t include VAT in the headline price, those that do will appear uncompetitive. Personally, I don’t think that’s much of an excuse. Keeping VAT out of headline prices simply look like a device to make room prices look better than they are.

In my view, if there’s a tax that your customers must pay then it should be included upfront so it’s immediately clear how much their paying for a room. Thankfully the ASA has started a compliance action to get the whole hotel sector to fall into line with its code, and expects hotels to change their advertising in late September.

Do you think it’s misleading for hotels to keep VAT out of headline prices? Have you spotted any other practices you think are misleading?

Comments

nfh says:

24 August 2012

It is misleading of any business to exclude VAT from prices given to consumers. However, according to Article 3 of the Price Marking Order 2004, services (unlike goods) are excluded from the requirement to include VAT. Does any legislation mandate the inclusion of VAT on prices of services?

I find hotels in many non-EU countries to be even worse. Many exclude “tax and service”, tax being at the prevailing government rate and service often being 10%, all added to the quoted room price. Isn’t the whole thing a service anyway? It seems absurd to add a service charge to a service.

Chris, on a minor mathematical point, if a price excludes VAT, then it is a sixth cheaper than the actual amount you’ll have to pay, not a fifth. Look at a price of £120 for example, where the VAT of £20 is one sixth of the total price.

Patrick Steen says:

25 August 2012

Good spot Nfh, fixed that now.

Andrew McKeand says:

The problem I encounter occasionally using online booking websites is that they do not highlight hotels/guesthouses that are not VAT-registered. This gives me problems with reclaiming my business expenses and effectively effectively means these establishments are 20% more expensive that their rates suggest (because our business cannot reclaim any VAT).

Although I fully understand the economics of this problem, I am very surprised that such a scenario occurs. If the hotel’s turnover is under £77,000, it must be very small and unlikely to attract business travellers. Am I missing something?

Kayleigh says:

30 August 2012

I had this with a Marriott hotel over the bank holiday, booked it online and it wasn’t until last minute that the VAT was brought in

Mark, Glasgow says:

I am sorry but I have never had a problem with Holiday Inn displaying anything other than the full rate including VAT. I have just looked at their official website and Stage 1 of the booking process clearly shows the full rate and underneath ‘Incl VAT’. Perhaps you have looked at non-official or third party sites? PS I have no association with Holiday Inn

John - London says:

The rest of the world displays rates exclusive of any taxes, not sure why London feels they should be different. I was in NYC last month and my hotel bill had 4 lines of taxes when I checked out. The bigger issue is the fact that the UK has taxes of 20%…this is the issue.

Janice Shipp says:

2 September 2012

This happened to me recently for the first time and I only realised that VAT hadn’t been included in the advertised rate when I checked out and paid the bill. It was particularly annoying because I had been looking at two hotels and booked that one because it was cheaper. I hadn’t checked because I was unaware it happened, but I’ll definately be checking for VAT in the price in future ( as well as breakfast, which is also not always included).

Kath - Rochdale says:

2 October 2012

I recently spent 4 days in a hotel in London. On the hotel web page it does show the full price – however, I thought I was being smart and used an internet booking service which showed the price at a significant saving. The saving was very significant! It was precisely the cost of the VAT – which was then added to my bill when I booked through them – so I paid the same as if I had booked through the hotel itself.

Pete says:

5 October 2015

Not about VAT, but about discount vouchers offered for hotel stays. My wife purchased a Voucher for £100 for my birthday present last year and we started to look for hotels. Well we found very few hotels accepted this voucher for one thing, and the other were out of the UK, we wanted a break in the UK. However after some searching we came across a hotel that we were able to use the voucher. But, after the visit we checked our finances and found that the hotel has added almost £100 pounds to the bill, thus making our voucher worthless. For example we checked the hotel price for 3 nights was Approx £300, they took this amount in advance. The final account was £400 with the £100 voucher price deducted, so in essesnce I paid £400 for a £300 3 night stay. I am not very happy, and am in the process of dealing with the company. I shall be back to let you know the comapy to avoid if I get anyway or not.

Have you found hotel website prices misleading?