There's a Fee for That
I booked a room last week at the Hyatt Grand Central in Manhattan. One night, one adult. The “find a room” page said that the price was $330 a night. Not too bad, I thought, for a great hotel in the middle of the city. So I made sure I had my schedule correct, clicked the Book button, and went to the payment page.
Just kidding, they said, the price is actually $431 a night because here are some fees.
One hundred dollars in made-up service fees that don’t appear to the consumer until he’s ready to pay. Made-up service fees that are not part of the price they’re advertising to the public. Made-up service fees that don’t even try to hide the fact that they’re gotcha-moment manipulative bullshit. There used to be a term for that: false advertising. I guess we don’t use that term anymore.
I've been thinking for a while about trends in airlines, hotels, big box stores, et cetera, where they constantly want you to get warranties, insurance, “cancellation coverage,” “unforeseen airline inconvenience coverage”, or whatever. Essentially they’re trying to sell you insurance for things that are perfectly natural inconveniences, including things that are their own fault. Only in the 21st century would we allow airlines to charge us fees to correct their own mistakes. They’re taking the accountability for what-ifs off of themselves and putting it onto the consumer. “If we deliver a shoddy travel experience, or a shoddy hotel room, or a shoddy washing machine, that’s your own fault — you should have just had a better experience.”
Or, you should have paid the fee. I realize now that what they're doing is selling you certainty. We all desperately crave certainty. And they now make a good portion of their money selling certainty as an accessory to your transaction, in addition to the revenue from selling tickets, rooms, and appliances.
Airlines have altered their business model to introduce uncertainty directly into your booking experience, so that they can then sell you the remedy. "Well just be aware that there are all of these things that can go wrong." Hotels do the same thing. "Just remember that if you cancel for any reason, or if something happens on our end that alters your reservation, you lose your money. Unless... well, unless you pay this extra fee."
It's all fees, all the time.
And we all know that uncertainty is part of any booking experience or any appliance purchase, or any event of any size in life. Things happen. And we also know that our chances of being one of those unlucky people who actually have an unforeseen catastrophic event is low. Extremely low. And yet… a lot of us pay those fees anyway. Because fear has been introduced directly into the shopping experience. And we are willing to spend completely irrational amounts of money to be rid of that fear.
If you’ve ever played the game Roller Coaster Tycoon, you might know of a funny bug (actually, feature) in that game. Intuitively, you only want to charge a couple of dollars for an umbrella at one your little park shops. Because that’s fair to the customer and “might drive better sales.” But when it rains, your guests will pay any amount of money for an umbrella. And they won’t even complain. And therefore, what makes the most sense for you, the park owner, is to just always charge the maximum price of $20 for an umbrella. Because the money you’ll make when it rains is astronomically higher than the amount you’ll get by making it a fair deal for your guests.
These so-called service industries are the park owner, and we are paying twenty dollars for umbrellas. And the worst part is, we’re paying twenty dollars when the sun is out. We will pay whatever price they set, because we want to stay here and ride their roller coasters.
I think of it this way. I take work trips to Connecticut. Every time I book, I'm offered an insurance policy on my flight and/or my hotel room. If I was to pay that fee every time, it would only be about 8 flights until I had spent enough money to cover an entire round trip ticket. And it's also a fact that my odds of having a catastrophe happen are... well, lower than 1 in 8. Which means that it makes economically no sense at all for me to pay those fees.
When bad things happen, it hurts. It’s inconvenient and it sucks. Especially when these “service providers” no longer take any accountability at all for making it right, because that’s no longer part of their business model. But what these fees do is prey on human biases to make us spend money that makes statistically no sense to spend.
Disclaimer: now listen, please don't skip these fees because JR told you to. That's not my intention here. I don't want you to be unprepared for bad things, or to suffer a loss that your bank account cannot tolerate. This is not investment advice. All I'm saying is, be aware that your own weaknesses and biases have been deliberately introduced into your shopping experience and you ought to take that into consideration when you take business trips to Connecticut.
Fear has been commoditized by every industry that can possibly squeeze it into their business model. And certainty is being sold as an actual economic product. We are also seeing a similar but different phenomenon in this sneaky-tipping culture that has taken hold in America of late.
I’m sure you’ve seen it. You see it at sandwich shops, carry-out counters, hair salons, ordering pizza online… just about everywhere. The default payment screen now, when you’re paying with a card, shows you a list of tip options. And on some payment screens, the default payment is programmed to already include a tip. I have even heard… I cannot believe this… that people have seen payment systems where you actually have to have the cashier remove the tip manually. Because the card reader has no “remove tip” button.
Encouraged tipping is not so bad when it’s someone who cut your hair. It wouldn’t be so bad if it showed up on a payment screen after someone helped you moved all your furniture. Because these are very personal, important services that are worth tipping for. But when this is the default payment screen at the counter at Subway, we have a fucking problem.
At no point in my human life should I be expected (or even asked) to tip someone who performed ten seconds of ordinary task for me.
When someone reached to the kitchen window and placed my carry-out order on the counter in front of them, I am not tipping them. Because that would be stupid. That was not service, that was not personal — that was barely even physical movement. But I’ll bet that credit card reader is still going to humbly suggest that I do my part and tip these poor workers.
These companies, restaurants, and service providers that use this tactic are using several very effective things against us:
The extreme discomfort we get from holding up the line behind us (“oh shoot, I’ll just pay the tip, who cares”)
The fear of being stingy and removing a tip that was already there
The fear of bringing this up to the cashier, which equates to saying out loud that we want to take money out of their pocket
The guilt we have all been trained to feel (to varying degrees of effectiveness) towards minimum-wage workers
The opportunity to be generous, even when that opportunity was externally imposed upon us
And, as absurd as it may sound, sex. For instance, there is a burrito restaurant near my house where, for several years, they hired almost exclusively college-age blonde girls. I’m not exaggerating. And you can bet that if the default payment screen included a tip, 9 out of 10 men were leaving a tip on that machine.
Now of course it’s no surprise that fear, desire, generosity, or sex are weaponized against the consumer. That’s always going to be true. What makes this especially pernicious is the fact that it’s impromptu, fast-paced, and public. That cocktail of pressures makes it ten times more difficult to handle.
I think it is incumbent upon us to be okay with taking a moment, when this happens. Take a moment, breathe, and ask yourself if a tip really is appropriate. If the answer is yes, I 100% support you. Tips are a wonderful thing when used appropriately. They can make somebody’s day. But I also think that this problem is not going anywhere if you don’t push back against it. You don’t have to be a jerk. You can simply say “I don’t appreciate that — please remove it, thank you.” Or “this system is trying to take from me. Please understand that that’s unfair and I will not be tipping.” Or, you can just say “no.” You can be honest while still being civil and even courteous.
There is an underlying principle which needs to be observed here. And that principle is, if you cannot afford to pay your employees a living wage, you should not be in business. Because that’s how business works. If you are outsourcing your employees’ payroll to your own customers, you deserve to fail as a business. And not only do you deserve to fail, but you must fail. In order to preserve the natural flow of competitive markets. In order to preserve the basic tenets of competition and a healthy job market.
If the employees of these awful establishments are allowed to feel the pain of underpayment for long enough… they will leave. They will stop tolerating it. And then the job market will be forced to compensate by offering them a better living.
Wage growth in this country is at its highest levels in quite a long time. And that’s not just because of inflation — it’s also because the millennials and Gen Z are finally saying enough is enough to nakedly abusive employer behavior (look up some of the recent stories about Starbucks, they’re wild). And that’s good. It’s painful, for a lot of people, but natural selection and growth are painful. Necessary change is painful.
Pay administrative fees on a glass of water and then drink it.
JDR
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” - Sam Walton