Home Hotels Why Hotels’ Posted Maximum Room Rates Are So High

Why Hotels’ Posted Maximum Room Rates Are So High

by SharonKurheg

You’ve checked in to your hotel and your room is ready. Before you unpack (does your room have a dresser? If not, here’s why), you decide to get a lay of the land.

  • You know your hotel hasn’t been reported for bed bugs because you checked, but you look at all the places where they tend to hide, just in case.
  • Your in-room safe is electronic – welp, you know how unsafe those safes can be, so you definitely won’t be using that.
  • Your electronic thermostat is set for 72 but there’s no way it’s actually that cool in the room, so you look up the hack so the room temperature will be where YOU want it to be.
  • You check in the bathroom and discover the water pressure in the shower is crap. You know how to fix it, but since you’re only staying for 1 night, decide not to bother.

Your next step is to look at the map on the back of the door, so you know where to go in the event of a fire. And then, depending on what state you’re in, you also see the rack rate for your room.

PC: Nancy B.

In case, it’s hard to read, these are the rack rates, from 1/1/2018 through 12/31/2099, as printed on the page:

Single Double Double
One Person Two in one bed Two in two beds
Daily $1,000.00 $2,000.00 $2,000.00
Weekly $7,000.00 $7,000.00 $14,000.00
Extra Person $500.00 $500.00 $1,000.00

The above photo was recently taken in an actual hotel in Florida, the OYO Waterfront Hotel – Cape Coral/Fort Myers.

Just for the record though, the OYO Waterfront Hotel – Cape Coral/Fort Myers is not the type of place that would ever charge $1,000 to $2,000 per night. On its own website, it’s charging $205. Booking.com lists it at $193/night. And Trivago can get it for you for $175. And no wonder – it’s rated 2 stars on TripAdvisor, where it’s also listed as the #7 of 7 hotels in Cape Coral, FL.

On top of that, the OYO Waterfront Hotel – Cape Coral/Fort Myers doesn’t get very good reviews. In fact, recent (all 2022) TripAdvisor reviewers use the word “dirty,” “horrible,” “unsafe,” “rude,” and “uncomfortable,” with “misleading marketing.” With those kinds of assessments, I think the only reason they’re getting away with charging even THAT much is because of its location. Hotels in beach towns, especially when they’re water adjacent, tend to get more money.

Anyway, it’s advertised as a “boutique hotel,” but based on the history I can find about the building, it’s really just an old extended stay motel (here are the differences between a hotel and a motel) on a canal, and they slapped an OYO label on it when it most recently changed owners a couple of years ago (originally built in 1985, the building was sold in 2002, 2015 and 2017, according to Remax).

So how does a 2 star hotel get off potentially charging $1000-$2000 per night?

It all has to do with legalities. Many states have statutes on the books that require “rack rates” (the most the hotel will charge) to be posted somewhere in the room or in a public space.

The laws in question are decades old, written during the times when hotel room rates didn’t fluctuate much, there was no internet to do online booking, etc. The only way to find out a hotel rate was to call or just stop in. The laws were intended to prevent hotels from gouging customers, especially during natural disasters. It was thought this would also stop discrimination by charging someone of a different race, religion, gender, etc., a ridiculously high rate as a way to discourage them from renting a room there. This way customers would know the “ceiling”/rack rate.

In the states that have such laws (Florida, Texas, California, Nevada and New York are among them), the hotel must keep their rack rates on file with the state, as well as post them conspicuously in the room. Many put them on the back of the hotel room door.

But here’s where it gets interesting.

A hotel that charges more than the rack rate on file can be fined. However they won’t be fined for charging less than what they’ve told the state. So hotel managers have learned to get around the law by making sure the posted rates are much higher than what they would ever actually charge for the room.

So, rooms at the crappy, 2-star OYO Waterfront Hotel CAN be sold for $1000/$2000. But they never will.

They could change the laws, but that would be more trouble than it’s worth. So the hotels continue to claim these exorbitant maximum prices and never charge them.

In other words, those posted rates you see in hotel rooms are pretty meaningless.

***Many thanks to Nancy B. for mentioning this topic and for her photos!

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1 comment

James January 11, 2023 - 2:22 pm

This dates back to a specific occurrence in US history. In August 1971 President Nixon announced a ‘surprise’ 90-day price and wage freeze to fight inflation. His predecessor President Johnson did not raise taxes to pay for the War in Vietnam. He used printed money from the basement of the U.S. Treasury. It was the 1st price freeze since WWII and caught businesses off-guard. If things were on sale, they had to stay on sale. Airlines could not adjust already published flight prices to a higher level. Stores could not increase their prices on individual items. All sorts of unintended things happened. This was back in the day when a hotel’s posted room rate was the actual room charge. If the notice on the back of the door said $27.16 then that’s what the customer was charged. Credit cards like Visa were just beginning back then. Your typical payment methods in 1971 were cash, check, or a retail-brand charge card like a Sears card only useable for purchases at a Sears store. Businesses wised up after that. Today you have the posted room rate being way in excess of what’s actually being charged. So you’re getting the room at a ‘discount’. The company can take away the discount at any time and now still comply with a surprise government price freeze.

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