How Did Australia/New Zealand Develop Their Nickel-and-Dime Economy and How Does it Affect the Travel Experience?

A traveler to Australia/New Zealand is quickly introduced to fees and add-ons of all kinds, some examples:

  • Booking fees on some airline websites
  • Fee to connect international and domestic terminals in Sydney (unless connecting to Qantas or Virgin Australia)
  • Depending on route, only coffee/tea/water free in flight, with various pre-flight and in-flight upsells for everything else
  • Hotels charging for everything from airport shuttles to wi-fi to checking out at noon (instead of 10 am as many set their policy)
  • Even the fish and chips place in Norfolk Island charging 60 cents for thimbles of ketchup!

Economists can make the argument that having everything a la carte brings rationality to the transaction. You get what you pay for, no more, no less.

Or you get people to pay a price incorrectly assuming basic services are included, then ream them for more. Such is the case of a hotel like the barracks-esque ibis Budget Sydney Airport that appears slightly cheaper than competitors until you show up and get hit for charge after charge for what the others include.

ibis Budget Sydney Airport add-ons

I don’t like these models for myself because my first thought when hit by a charge such as for wi-fi is to try to make do without or conserve, rather than relax in my stay. With everything so transactional, even more of the personality and hospitality is removed from the travel experience. By the way, I am writing this from Olini Lodge in Tonga where the garrulous caretaker insists guests feel at home and have run of the many fruits of the garden. What a change.

I don’t know the history of Australia/New Zealand in this regard, so I am curious.

Readers:

  • How did Australia/New Zealand adopt this extreme a la carte model to pricing in their consumer economy?
  • How do Australians/New Zealanders feel when they visit countries where prices are typically more inclusive? Better travel experience or feel they are paying extra for stuff they won’t use?
  • How do the rest of you feel when visiting Australia/New Zealand and encounter these charges? Does it make sense irk you?
  • US airlines have adopted much of this, will other parts of the US economy move in this direction?

Rapid Travel Chai newsletter ¦ Twitter ¦ Facebook ¦ Instagram

Pingbacks

  • GloverParker

    My experience is mostly around Australia but it’s always been rather PAYG (that’s “pay as you go” and a fairly well known acronym) My theory is until recently, Aussies and Kiwi’s lived pretty simple but high quality lives — there are social safety nets in place for just about everything and the tax structure ensures that nobody is too rich and nobody is too poor. Luxury goods – including imports of just about every kind — are heavily tarriffed and until the past decade or so, weren’t really realistically attainable. Consequently, pricing was always for the basics of what was needed — so called “luxuries” we’re add-ons when available. Also, there’s a real cultural norm around “the Aussie battler” — that’s the regular guy/family who should have access to a comfortable but not excessive life. Having “too much” can ostracize one in these societies. Finally, the Britishishness still exists and they have a bit of a PAYG culture too.

  • Russell

    I’m Aussie and have lived in the US 10 years. When I go home I notice what a giant rip off Australia is. You land at SYD get a coffee and it’s $6 – then a .50 cent surcharge to pay on credit card. My friends can’t pick me up curbside because SYD airport charges $86 or something insane to even be in the laneway for 5 minutes.

    I think Aussies are kinda used to be ripped off – and we notice it when we come to the US in particular how cheap and plentiful things are here. Order a ham sandwich in Oz – y0u get 1 or 2 slices of ham. In the US – it’s literally an inch of ham.

    Try buying a BMW in Australia ($60k plus for base model) or driving on a Sydney freeway ($7 to go 10 miles) it is insanely expensive. The average home in Sydney is over $1 million.

    It’s just an expensive place. I think a lot of it comes back to salary. Minimum wage in Oz is something like $19 an hour. And on TOP of that an employer must pay 10% 401k (“super”) and vacation leave as well.

    It all comes back to the consumer

  • BeenThere

    I understand that Australians and New Zealanders feel the same when they visit the USA and find they are expected to tip everybody.

    My guess is their approach is rooted in their historically egalitarian cultures.

    You didn’t mention that they often have a surcharge to use a credit card (particularly at high-end hotels).

  • Jay

    what do you expect from
    these rubbish hotels? the cheaper the brand the more of this sort of thing you should expect

  • Raj Malhotra

    These hotels are more rubbish than the hotels I stayed at in Vegas when I was broke in college. Choose a Hilton or Hyatt or Starwood or Marriott and everything will be good.

  • atxtravel

    @Jay – in Australia, you get nickle and dimed and ripped off at every opportunity. I stayed in Westin Sydney once and it was $10 for bottled water and $20 a day for internet. That was 2 years ago. Any attraction / museum was in the $40-60 range, good beer was $10 a pint, and the list goes on. As one Aussie I talked to put it, it’s a Nanny State. They regulate and tax/surcharge everything that can be. A Wyndham hotel near Cairns once asked me for 3% CC surcharge, even though I made the booking specifically on the chain’s website hoping to pre-pay. Had to argue with them about that.

    NZ wasn’t nearly as bad from what I remember, just pricey due to some parts of it being so remote.

  • Victor

    Booking fees on some airline websites: This is because there is an effective duopoly (Qantas owns Jetstar, Virgin owns Tiger) and the companies can get away with it. Note: the regulator is trying to take action, but they are inept.
    Fee to connect international and domestic terminals in Sydney (unless connecting to Qantas or Virgin Australia): The airport has been privatised. Have u seen the parking fees being charged at Sydney airport?
    Depending on route, only coffee/tea/water free in flight, with various pre-flight and in-flight upsells for everything else: Same as United. This is also why, as an Australian, I refuse to credit my flights to local FF programs
    Hotels charging for everything from airport shuttles to wi-fi to checking out at noon (instead of 10 am as many set their policy): You’re at the ibis. It wouldn’t be the same for other hotels.
    Even the fish and chips place in Norfolk Island charging 60 cents for thimbles of ketchup!: This is a tourist trap!

  • 02nz

    Garrulous? Do you mean gregarious?

  • sun

    I noticed this too a couple years ago, travelling to NZ and Australia.

    On a flight from Sydney to Wellington on Air NZ, the seats were 3+3. I was on an aisle seat – the middle seat and the window seat on my side were a mother and a teenage son. On the other side, three seats were empty. After reaching the cruising height, I told my neighbors that ‘you could use some room’, and moved across the assle to an empty seat. A few minutes later, a flight attendant came by and asked me to go back to my own seat. She brought a passenger from the back of the plane and gave him the entire row of the seat – while talking and laughing with him. She did the same for another back-plane passenger to another open/better seat. I am not talking about moving to a differnet class of seat. The same economy. The empty seats on Air NZ seem be the donuts that the flight attendant can give away to their friends. No one explain anything to me… I was astonished by the scene.

  • @jay, it’s usually the opposite! 5 star hotels charge $30 for wifi while it’s free at the super 8.

  • Jackson

    I would imagine one possible explanation is price elasticity of demand. Australia is so friggin far from everywhere else in the world, and most visitors probably make it a once in a lifetime trip. I would certainly treat my possible future trip that way. So people’s demand for goods/services would be much less elastic (responsive) to change in prices, even if they’re being nickel-and-dimed. And once you’re there, you also don’t have as many choices as you do during the planning phase. Put all that together and you have an environment where businesses can get away with this.

  • I grew up in Australia, and now live in the USA, so here’s my input:

    I was shocked when I moved to the US, and discovered that the price of a product (whether it be a clothing item, or something at a restaurant) was not the price one paid for the item, because sales tax is added to the price when checking out. In Australia, the taxes are generally included in the price of the item.

    I was shocked when I moved to the US that tipping was expected on many things; tipping was/is almost unheard of in Australia; one never tips their hairdresser, for example.

    I was pleasantly surprised that meals at restaurants in the USA include free refills of soft drinks (practically unheard of in Australia).

    So, there’s the other side of the equation.

  • MSer

    You do realize the Aussie dollar is 0.78 USD? So think of all Aussie prices at 22% discount…

    I didn’t find anything unduly expensive in Australia compared to adjusted prices I find in the US when on month-long trip last year. But we used points for most hotels and had status so weren’t nickel and dimed.

    Who the H puts ketchup on fish and chips?

  • NB

    Interesting. I always regard the USA as the capital of the nickel and dime world. Fully exclusive rates are the norm, with loads of extra fees, charges and taxes added after the customer has bought in. I live in the UK and such practices would simply be illegal. About the only thing where it’s the other way around is credit card charges, which strangely are generally included in the USA but, at least on travel websites, tend not to be in the UK, even though the merchant charges in the UK are significantly lower.

  • John

    Having just completed a 2+ week trip to Australia, I agree with all of the above sentiments, but I think the simple answer is the more balanced distribution of income.

    On the positive side, it is nice to know that the price seen on the restaurant menu is the price you will pay on the final bill. No need to factor in service charges, tips and sales tax. Of course, with the cost of service workers so high, you do encounter shorter opening hours and the occasional bad service…

    However, I also completely agree about many of the complaints from RTC: credit card surcharges, fees for ketchup, generally high prices, etc.

    I’m used to higher prices (it’s going to be true somewhere if you travel enough) but the one that annoyed me the most was the add-on price for extra sauce, a small thing but especially annoying when there were places that didn’t charge, such as the cafe at Port Arthur Historical Site or the concession stand at Sydney Olympic Park. It got to the point where I turned down the offer of sauce because I knew they would charge for it.

    To get around the booking fees at the domestic airlines, just book through an overseas OTA.

    To my surprise, credit card surcharges were not pervasive at tourist establishments. I had seen this with hotels, with Ticketmaster, and one or two transportation services before I arrived, so I just assumed it was everywhere, but that’s not the case. In fact, I changed too much cash into AUD because I ended up using my credit cards (even my Amex) more than expected. Hard to turn down 2x or 3x points on restaurants and travel and at a better exchange rate than at the bank!

    As far as I know, I did not pay any credit card surcharges once I was on the ground in Australia, not for my car rental, meals or any of my varied lodging options. There were some places that didn’t accept credit cards (and even more places that didn’t want to print out receipts) but these were the exception.

    All in all, I would return to Australia in a heartbeat. It remains one of my favorite countries in the world.

  • Rapid Travel Chai

    @MSer – all the sauces available were 60 cents, I want ketchup for my chips which were plain and dry in contrast to the suburb crumbed local fish.

    Part of the reason I went was the exchange rate favorable to me. I did not say I found the country overly expensive, I was there around 2012 at the AUD peak when it was brutal, rather my interest in a different pricing model and how that impacts us psychologically in our travels.

  • DaveS

    Interesting thoughts, but the best was that you’re in Tonga. I’m going in June, so very interested in your trip reports from there.

  • Jamie

    This is a really interesting question. I was there for a few months back in 2003, and don’t remember noticing that much nickel and diming. Then again, I didn’t buy that much.
    One thing that I find interesting about Australia and the U.K. Is that you get a discount for take-out. Originally I thought this was because they don’t need to pay for the space or waitstaff if people take the food with them. Now, I believe it is also related to VAT being charged different for eat in and take out.
    In the US you are more likely get a small extra fee (or no difference in price) for getting a meal to go from a restaurant that caters mostly to eating in.

  • Pingback: Not a fan of the Hyatt Place "charge you for everything" model - Points with a Crew()

  • Alice

    There is also typically a surcharge for going to a cafe on a public holiday to offset paying staff extra those days.

  • John

    @Alice, oh yeah, that too. On my first day in Sydney (the start of a four-day holiday), nothing was open except for Hungry Jacks, and they also had the public holiday surcharge of 10%. Got used to paying that pretty quick. I didn’t like it, but it made sense. I guess not too different from the unbundling that airlines have carried out over the past decade.