Avoid Tourist Traps: Holiday Costs & Hidden Charges
- traffic jams, heatwaves and hidden charges: you know they're coming but somehow they are impossible for the holiday-maker to dodge.
- As experienced travelers know, unexpected car hire charges are a common frustration.
- why doesn't competition eliminate these frustrating practices?
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traffic jams, heatwaves and hidden charges: you know they’re coming but somehow they are impossible for the holiday-maker to dodge. This summer, after online comparison shopping, we paid a ample sum for the privilege of collecting a hire car in Germany but dropping it off in Italy. Upon arrival at the Avis office in Garmisch-Partenkirchen, we were presented with an unexpected fee for driving in Italy – despite having already paid a drop-off fee.
This isn’t an isolated incident. As experienced travelers know, unexpected car hire charges are a common frustration. This column revisits a similar experience from 2019 with Europcar,highlighting a persistent problem across the industry.
why doesn’t competition eliminate these frustrating practices? In locations with limited competition – like Garmisch-Partenkirchen – car hire firms have less incentive to offer transparent pricing. However, even in competitive markets, a counterintuitive economic principle may be at play.
Economists Xavier Gabaix and David Laibson proposed that advertising “no hidden charges” can actually attract customers who believe they can find ways to avoid fees with competitors. this creates a perverse incentive for companies to maintain a degree of opacity in their pricing.
Consider the analogy of hotels: a hotel advertising all-inclusive pricing attracts customers who value simplicity. however,a savvy traveler might prefer a cheaper hotel with à la carte pricing,knowing they can purchase drinks and snacks elsewhere at a lower cost. The same logic applies to car hire.
Here’s a breakdown of common extra fees you might encounter:
- Cross-Border Fees: Charges for driving the car into another country (as experienced in the example).
- Airport Surcharges: Higher prices for picking up or dropping off at an airport.
- young Driver Fees: Additional charges for drivers under a certain age.
- Additional Driver Fees: Fees for allowing another person to drive the vehicle.
- Insurance Excess/deductible: The amount you’re responsible for in case of damage. Often, companies will try to sell you additional insurance to waive this excess.
- Cleaning Fees: