Or maybe I should title this post, “Hotel charged peak prices during peak demand period,” or better still: “Hotel price gouging promotes public safety.”
A Sea-Tac Airport area hotel raised its rates dramatically as it filled up during a snowstorm one night last month, and several patrons were shocked by bills from almost $275 to $465 the next morning. The natural question is what price the shocked patrons thought they had agreed to; but note on the night in question the hotel sign indicated rooms available at $53 and up. ($465??? That’s a lot of “and up.”) One potential customer asked about the rate in advance and decided to drive home through the storm rather than pay the price asked.
Even though Washington has no anti-price gouging law on the books, such price increases can be bad for a business’s reputation. But maybe it shouldn’t be bad for the hotel’s reputation: Price gouging in these circumstances probably promotes safety.
The story from KING5.com, first from two weeks ago: “Airport hotel rates jump during snow storm“
Puyallup resident Jason Anderson found a room at the Ramada Inn next to the airport, but you probably wouldn’t call him lucky. He saw a Ramada ad for $53. He didn’t know until he signed the receipt that he was charged $274.36.
“I couldn’t believe that it was nearly $300 for one night,” said Jason.
“I was just thinking they’re taking advantage of people,” said Meegan Anderson, Jason’s wife.
Ramada’s manager says charging that much, for what is normally a $60 to $80 room, is standard when the hotel fills up.
And then more recent fall out, also from KING5.com: “Guest takes hotel to court for big snow storm bill“.
The guest in question is a law student who was among the hotel’s patron the night of the storm. The hotel has refunded him his bill for the night, though that may not end the complaint.
Still it is possible that the practice is profit-increasing for the hotel, even with complaints and some refunds. Sure, these unhappy consumers won’t be back and a few potential customers may remember the news stories next time the weather gets bad. The hotel will probably still fill up with other weary travelers, many of whom will be shocked by their bills the next morning.
It is also possible that the peak pricing practice is efficiency-enhancing and safety-promoting. Consider if state laws limited the hotel to charging no more than 10% over the pre-snowstorm price, so about $90. Imagine two kinds of weary travelers on the road: “local” travelers contemplating another hour driving in the snow and who know the area well enough to locate other nearby hotels, and “distant” travelers facing a four hour trip and unfamiliar with the area. It is reasonable to suspect that at the capped price more of the hotel rooms will be filled by local travelers – those local travelers not deterred by a $90 price but at least some of whom would be deterred by a $275 price. The means a capped price would leave more distant travelers out in the cold, on the snowy roads, either making the long trip home or traveling unfamiliar streets trying to find some other price-capped hotel room during the period of surprise high demand.
On the other hand, letting the price rise will see more local travelers out in the cold, either making the one-hour trip home or searching somewhat familiar roads for a cheaper hotel room, making room available at the convenient hotel for the “distant” travelers who would otherwise face a riskier four-hour trip home.