New FTC “Junk Fees” Rule Expected to Influence Short-Term Rental Host Pricing Behavior

LAS VEGAS, NV – The Federal Trade Commission (FTC) announced in December 2024 that they would be instituting a ban on so-called “junk fees,” which is a term used to describe bait-and-switch pricing and other tactics used to hide total prices and misrepresent fees in the short-term lodging and live-event ticketing industries.

The Junk Fees Rule requires full up-front disclosure of pricing information “in a timely, transparent, and truthful way” as it pertains to consumers of short-term lodging and live-event tickets; the FTC says that the rule will level the competitive playing field and make it easier for consumers to engage in comparison shopping and ultimately, save money.

As far as the short-term rental industry is concerned, this includes hotels as well as all online booking platforms and websites such as Airbnb and Vrbo. And this rule regarding fee transparency, according to Mark Tremblay, an assistant professor of economics at University of Nevada, Las Vegas (UNLV), is likely to influence host pricing behavior within the industry going forward.

Typically, hosts set the prices for their rentals by comparing them to the prices others on the platform charge for similar properties; however, Tremblay notes, previously hidden fees – such as for cleaning services – may have “tricked” both hosts and renters alike, resulting in “artificially competitive” lower prices.

But now that the new FTC rule has come into effect, these hidden fees have been laid bare, and hosts have started raising their prices after being made aware that they’ve been “under-charging” for their rentals.

What we found is that the reaction on the host side is a bit different depending on the type of host,” Tremblay said. “So, some hosts are reducing their cleaning fees, as you would expect, but we’re seeing other hosts actually increasing their prices by a lot.”

Since the Junk Fee rule went into effect, the average in cleaning fees has been 4 percent, while in-turn other hosts have increased their rental prices by an average of 6 percent to compensate, which Tremblay said was an out-of-left-field discrepancy. This is especially true considering consumers have historically gravitated towards listings with lower cleaning fees.

This was a result we weren’t expecting. And it differs from how we think about how certain other large firms might react to hidden fees,” Tremblay said. “So, if you think of the Las Vegas Strip, how they’re reacting to resort-fee transparency, they probably know what prices to set. A random host in a small neighborhood – they have a couple bookings a month. They’re not a big corporation, and so they might be a little bit less aware of what prices they should set, and this impacts them as well.”

Shelter Realty is a Real Estate and Property Management Company specializing in the areas of Henderson, Las Vegas and North Las Vegas, NV. Feel free to give us a call at 702.376.7379 so we can answer any questions you may have.