While there was once a time when economy travelers could expect to be seated with their families on a plane free of charge, the last decade brought with it industry changes that have doused such expectations: Families often find themselves sitting apart unless they're willing to fork over fees.
Major airlines now treat seating fees as a revenue stream of their own but the Biden administration is proposing a ban on separating families traveling with children younger than 13 years of age.
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Fee to have a top seat at a restaurant? Here is how that would work
Some airlines, including Alaska Airlines (ALK) and American Airlines (AAL) voluntarily complied by eliminating the seating fees for a young child's caregiver but implementation of an industry-wide mandate would need to be voted in by Congress (something that is particularly unlikely with the incoming Trump administration).
As of now, other industries are taking a page out of aviation's book and seeing where they can quietly introduce a seating fee — according to a note that Deutsche Bank (DB) sent to its investors, the MGM (MGM) hotel chain is weighing the possibility of introducing tiered seating to some of its restaurants during popular times or for top-view seats.
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“While the revenue opportunity with ideas like this are unlikely to be overly material from a revenue perspective, we do believe creative, and more importantly, high-margin flow-through concepts of this sort could be additive to EBITDA and are currently under the radar,” Carlo Santarelli, a Deutsche Bank analyst focusing on the hotel industry, writes.
The MGM chain owns major Las Vegas hotels such as the Bellagio, Mandalay Bay, the W, Park MGM and Luxor. Certain establishments on the Las Vegas Strip, such as the revolving restaurant at The Strat hotel, already charge fees of between $20 and $40 for a window seat with the best views.
Restaurant and hotel fees are good for investors but will customers accept?
Santarelli's investor note expressed optimism around MGM's ability to generate revenue. While a potential seating fee would be only one small change, the biggest difference is coming from the fact that MGM is already raising resort fees at its hotels by an average of $6 in 2025 — fees that could generate over $70 million a year of net revenue and up to 2% of earnings before interest, taxes, depreciation and restructuring (EBITDAR).
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"With the broader brick-and-mortar business unlikely to create a growth tailwind for MGM from a valuation perspective, we see the largely nascent 2024 BetMGM vertical as a key element of the 2025 narrative around MGM," Santarelli wrote further.
But raising fees is always a push-and-pull between bringing in as much revenue as possible without angering customers. Critics often call the excessive fees that Vegas resorts are known for deceptive, while hotels and many establishments were also targeted by President Joseph Biden in the attempt to crack down on junk fees.
"When you think you're paying one price to book a hotel, you only find out after checking out that there's a resort fee you never heard about that’s added to your bill," Biden said when proposing a ban in October 2023.
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