NYC hotel junk fee crackdown will save millions
All-in, upfront hotel pricing required by DCWP will save New York residents and visitors between $46.4 and $67.4 million per year
When you book a hotel room, the price you see is often not the price you pay. Many hotels advertise a base room rate and only later reveal mandatory “resort,” “destination,” or other “junk fees” that make it harder for consumers to understand the true cost of a stay and harder to comparison-shop across hotels.
Last August, the New York City Department of Consumer and Worker Protection (DCWP) proposed a rule to address this problem. Modeled closely on a recent Federal Trade Commission (FTC) rule, the rule would require hotels that advertise or are located in New York City to display the total price of a room upfront, inclusive of all mandatory fees.
Using the FTC’s framework and updating it for the number of bookings covered by the NYC rule, we estimate that eliminating these junk fees will save consumers between $46.4 and $67.4 million in 2026 by reducing the time spent searching for hotel rooms. Of this, $24.7 to $35.9 million will accrue to NYC residents from their nationwide bookings, and $21.7 to $31.6 million will accrue to U.S. consumers located outside of New York City from their NYC bookings. These figures are lower bounds; they do not account for consumer savings from bookings they otherwise would not have made had prices been transparent, nor for any savings from the competition-enhancing effects of transparent pricing.
The Economic Case for Junk Fee Regulation
Many hotels practice what economists call drip pricing: They advertise a low upfront price and disclose mandatory add-ons only later in the booking process. The FTC’s rule documents that this misleading practice is widespread in the hotel industry.
The junk fee rules, which require upfront pricing, help consumers in three key ways. First, they lower search costs: When the full price is visible immediately, consumers spend less time comparing listings, clicking through checkout pages, and backtracking once fees appear. Second, they reduce the deadweight loss from misallocation: With drip pricing, some consumers end up booking hotels that are more expensive than what they intended to buy, simply because fees were hidden until the end. Third, they increase competition: By making it easier to comparison-shop, the rule enhances price competition, putting downward pressure on prices.
Estimated Savings from Eliminating Junk Fees
In its national analysis, the FTC conservatively quantified the savings to consumers from reduced search costs, but did not quantify the additional savings from reducing the deadweight loss of misallocation or savings from more vigorous competition. We follow the same approach to estimate savings for NYC residents and visitors here.
First, we estimate the number of bookings covered by the rule, defined as bookings at hotels that advertise or are located in NYC. Assuming that NYC residents book hotels at the same rate as the national average, we estimate that NYC residents will make 22.6 million bookings in 2026.1 Based on data from the NYC Comptroller and New York City Tourism + Conventions, and netting out estimated bookings made locally by New Yorkers to avoid double-counting, we estimate there will be 19.9 million bookings by U.S. consumers who reside outside of New York City at NYC hotels.2
Next, we update the FTC’s estimate of time savings with the most recent wage data.3 The FTC estimates that upfront pricing saves consumers between 2.39 and 3.47 minutes per booking (a 10.6% reduction). Valuing those minutes at our updated time value yields dollarized time savings of $1.09 and $1.59 per booking.
Finally, we estimate the total savings from junk fee elimination as the product of the number of bookings and the dollarized time savings per booking. This yields total savings of $46.4 and $67.4 million per year, with $24.7 to $35.9 million accruing to NYC residents from their nationwide bookings and $21.7 to $31.6 million accruing to U.S. consumers outside New York City booking hotels in NYC.
NYC’s share of the national population is estimated using figures from the NYC Department of City Planning and the U.S. Census Bureau.
Annual bookings in New York City are computed as (rooms x occupancy rate x 365) / (average length of stay). Up-to-date inputs are taken from the New York City Comptroller (occupancy), New York City Tourism + Conventions (room supply), and Hotel Tech Report (average length of stay). We conservatively net out bookings by NYC residents at NYC hotels by assuming New Yorkers book hotels in NYC at the same rate as the average U.S. consumer, and subtracting this overlap from the number of bookings.
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