Dollars and Cents Part 4 – Beware of Hidden Costs

Retired Adventurers are always looking for discounted or free travel. That’s our nature we’re Geezers. A very big consideration for us is hidden costs, because we are retired and on a fixed budget. If you are on a fixed budget and get zinged by a large hidden costs it could take you months, of tight belt budgeting, to get back on track so, the issue of hidden costs is a very important consideration.

I hate hidden costs and the travel industry uses hidden costs every where. Billions of dollars are spent by unsuspecting travelers on hidden costs that can be avoided in many cases and if not avoided at the very least budgeted for if you know they are coming.

TAXES

What is it they say, “the only two things that are sure bets are: death and taxes.” Well, for travelers who are on a fixed income taxes can be a real pain. Some of fun taxes you will incur as a traveler are: sales tax, gas tax, lodging tax, car rental tax, and restaurant tax.

The reality is  that when it comes to the hidden cost of taxes all locations are not equal and cost to unsuspecting Geezers can be financially crippling. Lets start with sales tax. In Montana, Oregon, New Hampshire and Delaware the sales tax for State and Local government is zero, in Louisiana the average combined local and state sales tax is 9.98%. I think that’s a consideration if you are deciding on a week in New Orleans or the mountains of Montana. The map to the right shows the differences in sales taxes in different states.

Just because it’s an easy subject lets talk the tax on gas. Alaska’s gas tax is 12.25 cents a gallon compared to Pennsylvania that is 50.4 cents a gallon. The average car has a range of between 400 and 600 miles what that means is you can plan your trip so you don’t have to buy gas in Pennsylvania or other states with a high gas tax.  If you are doing a cross-country trip you can use the map to the left to set up your trip to fill up in the least expensive states and save twenty to thirty cents a gallon on your gas bill. On a three thousand mile road trip that could add up.

Lodging tax, rental car tax and meal taxes are termed “discretionary travel taxes” and vary dramatically in different communities. These costs are a combination of State, County and City tax levies. In 2015 the National Center for Policy Analysis did a study of hidden travel costs and found that the difference in the tax costs of various cities was substantial. While cities like Burbank California had an estimated travel tax costs of $1.58 cities like Portland have travel tax costs as high as $22.86. In the study the authors estimated that travel taxes are about 10%. This 10% calculation does not include the already hefty tax that everyone in the location pays like sales tax.

If you buy an airline ticket there will be taxes over above the published price. If you get a rental car their will be taxes and fees over and above the published fees. if you take a cruise there will be taxes and port fees over and above the published price.

Taxes can effect your bottom line when you travel so you should budget for them and may even modify travel plans based on travel tax issues.

RENTAL CARS

One of the huge places for hidden costs in travel is renting a car. Hidden costs on your car rental can be listed as: Energy Recovery Fees, State Surcharge, Local Surcharge, Vehicle License Fee, Sales Tax, Concession Recovery Fee, Insurance, additional driver fees, toll fees and a myriad of other obscure and unknown costs. To the left I did a screen shot of a car quote in Houston where the hidden costs are almost as much as the car what is some of this? What is CFC or tangible Tax? If you look at the estimated tax and fees on your bill you will see that different companies will call the same fee by different names one will call Vehicle license Fees VLF. One will list Local fees. One will not have Concession Recovery Fees but will have Airport Fees. In short car rental add ons are very confused. Some companies have a small tire and battery fee and some do not.

When you are renting a car you have to consider the total cost of the car to get the best deal.

FLIGHTS

All of the base flights quoted on the Internet are effected by taxes and airport costs. The chart to the left is the costs incurred on a British Airways flight from New York to London. The sad reality is:  you can get a flight from New York to London on a discount carrier for less than BA charges for taxes and fees. The $464.25 added charge is sadly also added if you fly with BA miles. So to fly from New York to London on BA with Avios Miles will run you $464.25 plus 40,000 Avios air miles.

This is an extreme example but the point I’m trying to make is that these hidden costs like tax, surcharge and carrier imposed charges have an impact on your bottom line when buying a flight and need to be considered even if you use points.

HOTELS

When I discussed lodging tax above in the tax section of this article it was clear that the hidden costs for hotels can vary drastically depending on the community you are in but here is some really good Geezer news. If you pay for your room with points there are no added taxes. Look at the example to the left and the one below. They are for the same IHG room in Orlando. ,
The calculation for the room if paid in dollars includes a 12.5% tax but the calculation if you use your points, shows there is no tax charged. Unlike airfare motels don’t tax or have add-on costs if you pay with points. That basically means that with your 20,000 points you got a $137.48 worth of value because you not only saved the base value of the room but you also didn’t have to pay the hidden $15.28  tax. I don’t understand this but I have never seen hidden costs hooked onto a motel room paid for with points.

Now you ready for something really weird. Many motel chains allow you to pay for your motel by a combination of points and dollars. In the example on the left the room was paid for by 15,000 points and $35 but like the point example there is no tax tacked on, not even for the $35 fee. So your total outlay for the room paid for by a combination of points and dollars has no hidden tax.

This anomaly in how purchases that are made with points effect hidden costs like taxes is interesting because it makes your points more valuable.

CRUISES

If you have stuck with me through out this article you now get to hear me rant from my biggest soap box. I recently priced a repositioning cruise. I priced it with various Cruise companies.  The example I’m going to share is with American Airlines Cruise Company but my examples would be consistent with any cruise company.

An unsuspecting buyer, looking at the deal to the left, would say ,”WHOPPEEEE! I get to Cruise from Barcelona to Orlando for $38 dollars a day, Honey pack our bags.”

My dad told me a simple truth a long time ago, “If a deal is too good to believe, there is probably a reason.”

In order to explore this $499 cruise I called the nice people at American Airlines Cruise company and here is what I found out.

  1. The $499 fee does not include taxes and port costs and for the cheapest room those port costs and taxes are  a total of $107.
  2. The $499 fee does not include the $13.99 fee for crew tips which Norwegian will charge you per person per day.
  3. The four free offers are not allowed if you get the $499 deal. In order to qualify for any one of the offers you actually have to pay $699 for your inside stateroom.
  4. At the $699 rate you get the free offer but you choose the beverage package (my favorite) have to pay a beverage gratuity on your free package (what is it about FREE these people don’t understand).

I hope you are getting the picture, the $499 is just the start, your cruise will cost more. Don’t get me wrong, it is still a great deal but budget a lot more than the $499 because the hidden costs will drive the cost up.

The smart move is to find a good rate on the internet and then call and start asking questions:

  1. How much are tax and port costs?
  2. What is the daily on board gratuity cost?
  3. Is the daily gratuity mandatory?
  4. Tell me about the free on board spending?
  5. Tell me about the 4 free offers?
  6. Can I get a final quote including everything?

In my conversation with American Airlines Cruise company I discovered that Charlene and I would be spending $790 apiece and that at that reduced rate we would get a $25 on board credit but none of the 4 free offers.

The free offer we would have gotten was the beverage package so without that advantage we would be charged the ship board costs for our drinks with  an automatic 18% gratuity tacked on.

If we opted for the beverage package our cost per person went up to around $1100 dollars per person. That is still a good deal when you consider your pampered for 13 days and don’t have to do dishes make your bed or cook.

OTHER MISC. HIDDEN COST

There are lots of other hidden costs that will jump out and bite you on your trips. There are transport costs to the motel, the cruise ship and the airport. There are the tips. There are internet costs. It goes on and on so I usually just add 10% for miscellaneous costs that is designed to cover all the hidden costs I just can’t for see.

As Geezers we travel on a fixed budget. We can definitely afford to travel but failing to understand and prepare for hidden cost can put a nasty dent in our budgets. To get articles sent to you that will help you travel like a Geezer please sign up below for our free email service.

 

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