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Friday, 02 September 2011

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Price gouging after a disaster
Posted by Stacey Mieyal Higgins at 12:00 AM

Here we go again. Now that Hurricane Irene has bid farewell to the East Coast of the United States, stories of “bad business” are emerging in her wake. The most recent I found was a hotel in Brooklyn, New York—the Hotel Le Bleu—which reportedly charged guests US$999 rather than its usual US$250 per night during the weekend of evacuations in Manhattan, according to theNew York Daily News.

A hotel employee was quoted in the story as defending supply and demand basics: “It was just because of high demand,” said the employee, who would not give her name. “A lot of hotels did that.”

There are many stories that paint hotel operators in a negative light on the subject. In London more than a year before the 2012 Olympics, hotels also are fighting claims of price gouging. In New Zealand ahead of the Rugby World Cup, hoteliers are justifying higher rates while the media quotes hotel customers on the “abhorrent” practice.   

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These examples, of course, refer to large-scale events that impact demand and are prepared for well in advance. Nevertheless, hotelier practices still garner media attention.

It’s an interesting topic that also commonly comes up after natural disasters around the world. Are hotels justified in capitalizing on increased demand, no matter the circumstances? That’s not a question I’m going to answer, but it is one that every hotel should address before natural disaster strikes. How will your revenue management team respond?

I’m curious to hear how you might react in similar circumstances. Feel free to share your thoughts in the comments section below.

The opinions expressed in this blog do not necessarily reflect the opinions of HotelNewsNow.com or its parent company, Smith Travel Research and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.



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7 Comments
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13 September 2011 at 12:01 PM Central Time
In response to: Price gouging after a disaster
Indy Chris commented:
I think it would be morally wrong to triple the rates during an area disaster. I do not believe it would be wrong to raise the rates a little bit, maybe 20 percent maximum because the demand is so incredibly high. Local governments are content with the additional revenue the higher rates generate also. Anything more than 20% during a disaster should be punishable by law as price gouging.

06 September 2011 at 7:29 PM Central Time
In response to: Price gouging after a disaster
anonymous commented:
Thomas Sowell be damned: Raising prices above published maximum room rates is bad business. Customers who feel ripped off never will forget, and they'll never stop telling others about their negative experience. Wake up! This is all about customer relationship management, not economics.

06 September 2011 at 8:41 AM Central Time
In response to: Price gouging after a disaster
ReadThomasSowell commented:
I suggest everyone (re)read Thomas Sowell's Basic Economics. Price fixing never works. As an example, were hotels to "fix" prices at lower rates, wealthier individuals might decide to book two rooms - one for mom and dad; the other for the kids - when one room would suffice. As a result, a couple needing shelter may be shut out. It can be ugly, but market pricing is the only way to ensure that scarce resources are appropriately distributed.

02 September 2011 at 12:43 PM Central Time
In response to: Price gouging after a disaster
Gold Miners Inn, Grass Valley, CA commented:
Each year our area of Northern California in the Gold Country sees ice storms occasionally in the winter and area fires in the fall. Our rates average $159 - $215. We've been open for over 4 years and for locals we have offered a goodwill rate of $99. Just this year we raised that to $109. We've received quite a bit of good press and positive comments from this. Ownership is relatively local and we are proud of our community. We would be ashamed of ourselves if we didn't act as a vital part of our community, Grass Valley and Nevada City, CA.



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