Hotels in Hot Water for Not Including VAT

Posted on 3 September, 2012 by Kirsten Kennedy

When holidaying abroad, travellers expect to pay over the odds on essentials such as flights, meals and hotels. After all, laws are different in other countries and overhead costs such as taxes are not necessarily included in the advertised price like they are in the UK.

Unfortunately, recent research by consumer champions Which? has demonstrated that hidden costs when booking a hotel are not solely a foreign problem – almost half of commercial property hotel chains in the UK do not include Value Added Tax (VAT) in the masthead price online.

This is actually a breach of both government guidelines and advertising rules in the UK. The Department of Business, Innovation and Skills, who are responsible for legislation covering building advertisements and costing, say that VAT should be included in any initial price offered to consumers, and that the cost of VAT should be displayed “prominently” to ensure for greater clarity.

Which? Travel discovered that 11 out of the 24 surveyed hotel chains did not include VAT on the main page of their website, thus technically springing the extra 20 per cent charge on consumers when they are already in the process of booking a room. In some cases, this charge was only revealed right before the customer entered the card details to confirm their transaction.

The rules on online advertising exist in order to allow customers to easily compare prices and search for the best possible deal. By withholding the VAT cost, hotel firms could potentially be breaking codes laid down under Consumer Protection from Unfair Trading Regulations, according to Martin Fisher, consumer expert from the Trading Standards Institute.

He said; “The law says that price indications for services such as hotel bookings should not mislead.

“Consumers should know the full price they will pay before they commit themselves contractually.”

Hotel chains including Crowne Plaza, Hilton, Holiday Inn and Radisson Blu were all named and shamed by the report as not including VAT on their main page prices. In fact, the investigation was launched by Which? Travel after the Advertising Standards Authority (ASA) received complaints against Crowne Plaza for not displaying VAT inclusive prices on their website. As a result, the ASA ordered Crowne Plaza, a subsidiary of Intercontinental Hotel Group, to restructure the pricing on its website to bring it in line with government regulations.

A spokesman for the ASA said; “Following on from the ASA adjudication about VAT inclusive pricing in May, the Committee of Advertising Practice has been undertaking compliance work to help the hotel sector bring its advertising into line with the Advertising Codes.”

Hotel chains that were found to consistently advertise VAT inclusive prices on their websites included Best Western, Ibis, Macdonald and Novotel.

Would you be put off booking a room in a commercial property hotel if the added VAT charge was sprung on you towards the end of a transaction rather than included in the masthead price on the first page of the booking form? Do you think that any hotel chains that do not comply with advertising codes should be fined or punished in some way, or do you believe that it was simply a misunderstanding that led to VAT charges being left out of the initial prices?

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