Rising Consumer Backlash and Regulatory Risks in the Hotel Industry: The Case of Pebblebrook Hotel Trust

The hotel industry, long reliant on ancillary fees to bolster profitability, now faces a perfect storm of consumer activism and regulatory scrutiny. At the center of this upheaval is Pebblebrook Hotel Trust (PEB), a real estate investment trust (REIT) that owns and operates a portfolio of urban and resort properties, including its Curator Collection brand. The company's business model—built on cost-cutting and supplemental revenue streams—has come under fire from a coalition of hotel workers' unions and increasingly empowered consumers. This shift not only threatens PEB's financial performance but also signals a broader transformation in how the hospitality sector navigates transparency, trust, and regulatory compliance.

The Union-Driven Consumer Awakening

UNITE HERE, the hotel workers' union, has spearheaded a campaign to expose what it calls the “resort fee ripoff.” Through its website, CuratorCollectionCon.org, the union has educated guests about the prevalence of hidden charges at Curator Collection properties. These fees—often labeled as “amenity fees” or “destination fees”—can include access to WiFi, filtered water, or even a 20% discount on a hotel mascot. The union's analysis reveals an average charge of $40 per night, with some hotels imposing fees exceeding $100. Crucially, these charges are often added without explicit consent, violating state consumer protection laws in jurisdictions like California and New York.

The union's strategy is twofold: to empower consumers with tools to request refunds and to pressure hotels to waive fees upon complaint. The website provides a template letter citing relevant state laws and lists contact details for each Curator Collection hotel. This grassroots approach has amplified consumer dissatisfaction, particularly as travelers become more vocal about their right to transparent pricing. For PEB, the fallout is twofold: reputational damage and a potential erosion of ancillary revenue, which has historically offset rising operational costs.

Regulatory Tailwinds and the Cost of Compliance

The union's efforts align with a broader regulatory trend. In 2025, the Federal Trade Commission (FTC) implemented its Junk Fees Rule, mandating that all mandatory fees be disclosed upfront during the booking process. This rule, effective May 10, 2025, directly targets the practice of “drip pricing,” where fees are hidden until checkout. States like California have gone further, enacting laws that mirror the FTC's requirements and penalize noncompliance.

Florida, another key market for PEB, is set to introduce SB 606, a law requiring transient lodging establishments to provide written notice to guests who overstay their check-out time and to itemize fees on receipts. Effective July 1, 2026, the legislation will force hotels to disclose operations charges—such as automatic gratuities or delivery fees—separately from base prices. These state-level changes, combined with federal rules, create a patchwork of compliance challenges for REITs like PEB, which operate across multiple jurisdictions.

The Curator Collection's Decline: A Canary in the Coal Mine

The Curator Collection, launched in 2020 as a cost-effective alternative to traditional hotel brands, has seen a 37% decline in membership since its inception. This drop reflects growing dissatisfaction among hotel owners, who may view the brand's lack of property inspections and brand standards as insufficient to justify the fees charged to guests. Pebblebrook CEO Jon Bortz's “DOGE” strategy—focused on deregulation and efficiency—has not shielded the company from this reputational and operational backlash.

The Curator Collection's struggles highlight a critical vulnerability for REITs: the reliance on ancillary fees to maintain margins. As consumers and regulators push for transparency, the ability to extract value from hidden charges is diminishing. For PEB, this means not only a potential loss of revenue but also the need to invest in compliance infrastructure, which could strain its already tight capital allocation.

Investment Implications and Strategic Considerations

For investors, the risks to PEB are multifaceted. First, the company's exposure to high-fee markets like California and Florida—where regulatory changes are most aggressive—could accelerate margin compression. Second, the union-driven consumer awareness campaign may lead to a broader shift in traveler behavior, with guests increasingly demanding upfront pricing and refusing to pay for services they do not use. Third, the decline in Curator Collection membership suggests that the brand's value proposition is no longer resonating with hotel owners, potentially limiting PEB's growth prospects.

However, these challenges also present opportunities. Companies that adapt quickly to the new regulatory environment—by redesigning pricing models, enhancing transparency, and investing in guest satisfaction—could gain a competitive edge. PEB's strong balance sheet, with a net debt-to-EBITDA ratio of 5.8x and $267 million in cash, provides a buffer to navigate these transitions. The key will be whether management can pivot from cost-cutting to value creation, aligning with consumer expectations rather than resisting them.

Conclusion: Navigating the New Normal

The hotel industry is at an inflection point. Consumer activism, driven by unions like UNITE HERE, has exposed the fragility of opaque pricing models. For REITs like PEB, the path forward requires a delicate balance: maintaining profitability while embracing transparency. The regulatory landscape, both federal and state, will continue to evolve, with 2025 marking a turning point in the fight against hidden fees.

Investors should monitor PEB's response to these pressures. Will the company double down on its cost-cutting ethos, risking further consumer backlash, or will it innovate to align with the new era of transparency? The answer will determine not only PEB's fate but also the broader trajectory of the hotel REIT sector. In a world where trust is the new currency, the ability to earn and retain it may prove more valuable than any ancillary fee.