Marriott busted on sneaky "resort fees"
Hey Snackers,
Thought experiment: Amazon's Prime Day just began. But is it just an ironically American knockoff of Alibaba's "Singles Day?"
Markets barely budged before the 2nd quarter earnings season kicks up a notch today from Domino's to Goldman.
Marriott gets sued for hiding "resort fees" until the last second
Excuse me, good sir, what's this "resort fee?"... You were enjoying that early summer trip until an ambiguous fee at checkout rips a $100 hole in your soul. Now the Attorney General of Washington, DC has sued Marriott over it, accusing the chain of deceiving consumers on prices. The AG is demanding two forms of justice:
- Transparency: Marriott must add "resort fees," "destination fees," or "amenity fees" to the nightly price of the room like an honest multi-national corporation should.
- Restitution: Marriott should refund all the customers whose trips got buzzkilled by the surprise fee.
These are pure profit puppies for hotels... At first, resort fees were only at resorts, paying for things like your afternoon at the rock climbing wall. But the fees spiked 400% last year as hotels realized they could sneak them into almost any bill. Here's how:
- Hidden costs: Marriott highlights the $219/night, but obscures the "$30 daily destination fee added to room rate."
- Ambiguous labels: Bundling the resort fee into the "Taxes & Fees" line gives the impression it's a government tax (it's not — it's for the hotel).
- Make it mandatory: The CEO of Marriott defended the resort fee, comparing it to an airline baggage fee. But baggage fees can be avoided — resort fees cannot.
This could hurt sales or profits... Resort fees are being used to cover should-be essentials like a bottle of water and access to wifi. If Marriott loses this case it will have to fess up about the actual price of a room by including the fee, or just erase it. Either outcome is bad for the big hotel business.
Chobani whips up a new spinoff as Greek Yogurt loses its mojo
The OG of Millennial lactose tolerance... Turkish entrepreneur Hamdi Ulukaya fed America's Greek yogurt cravings when he created Chobani in '05. Now the strained yogurt pioneer is launching a new line featuring nut butters (almond, cashew, hazelnut) in 5 flavors nationwide this month. But when we looked deeper into Greek yogurt, we noticed it's having a problem.
- All yogurt: Sales fell 2% last year (their 3rd straight annual decline).
- Greek yogurt: Sales dropped 7% in 2018.
- Chobani Greek yogurt: Sales rose 4% — It's the only major yogurt-churner with positive sales growth right now.
If cows could talk... they'd tell you that Chobani products' successes and failures reveal its strategy — the Greek yogurt-based ones are thriving while its non-Greeks suffer:
- What’s working at Chobani: Its "Less Sugar" version, Chobani "yogurt drink" (picture a yogurt milkshake), and the kids' version, "Gimmies," with cartoons on the box, launched last year.
- What’s not working: Chobani Smooth — its non-Greek yogurt. After 2 years, it's getting shut down.
Chobani is pulling a Coca-Cola... It's using product spinoffs to save slowing growth. With soda sales shrinking, Coke's using Coke Zero, Coke Vanilla, and Cherry Coke to find growth with the same brand. It tweaked the product just enough to attract new customers without hurting the identity. Chobani is digging into the same playbook: Change the packaging and purpose, don't change the core ingredients or brand.
China trade war slows Citigroup's banking profits
Do bankers still get company Blackberrys?... Asking for a recovering analyst. Citigroup kicked off a slew of earnings reports from big banks Monday — profits rose 7% to $4.8B, but revenues inched up by just 2%. At home, surprisingly stable financial markets hurt Citi's chances to make trading revenue. That trend is expected to affect JP Morgan and Goldman Sachs when they report their April-June results today.
Big corporations aren't playing in China anymore... For huge companies that do business all over the world, it's important to have a worldwide network of bankers — Citi's got that. Citi's huge corporate clients though aren't borrowing from Citi as much, especially in China.
- Related: China's economic growth slowed to the lowest rate in 30 years, hitting a 6.2% growth rate. The trade war between the #1 and #2 countries in the world has put a damper on foreign investment over there.
Interest rates aren't helping, either... Most stocks ripped their tops off to bask in low interest rate rays expected to hit this summer. But banks actually benefit from high interest rates because they can make more money off customers' deposits and through lending. And the Fed's policy shift to cut interest rates (to boost the economy mid-trade-war) has pushed stocks of major banks down 12% over the past year (according to a big bank ETF).
What else we’re Snackin’
- Arriving: Uber released its 3rd diversity report and will now tie executive compensation to hitting diversity goals
- Öût: Ikea is closing its only US factory and moving it to Europe because of costs
- Delay: Boeing reveals that its 737 MAX grounding could stretch into 2020 as more details get extra safety double-checks
- Record: China's economy slowed to its lowest growth rate in 30 years — but its 6.2% GDP growth still beats America's ~3%
- Coined: Bitcoin briefly dips under $10K after President Trump says he's "not a fan"
Tuesday
- Facebook's head of Crypto starts 2 days of Congressional grilling in DC
- Earnings from Domino's, JPMorgan, Goldman Sachs, and Johnson & Johnson
Disclosure: Authors of this Snacks own shares of Alibaba and Amazon.
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