Super Bowl price gouging complaints

Michael Giberson

If you follow price gouging headlines, you become accustomed to seeing price gouging stories around big sports events: the Rugby World Cup, NASCAR races, NCAA basketball finals, and always the Olympics (a selection: Barcelona 1992, Atlanta 1996, Sydney 2000, Salt Lake City 2002, Athens 2004Vancouver 2010, London 2012, and finally this extreme example).

All of which serves as context to reports of Super Bowl price gouging.

Super Bowls usually produce price gouging complaints. But, as a story about today’s Super Bowl reports, rates in Indianapolis may have a particularly strong mark-up because of the relatively small host city. “This is what happens when the NFL books the nation’s largest sporting event in a city with only 6,000 hotel rooms. … By population, Indianapolis is the smallest Super Bowl city since Jacksonville, Fla., which hosted a disastrous game in 2005.”

Rooms are not in perfectly inelastic supply, non-traditional spaces from spare bedrooms to whole houses are being rented out for the week. Nonetheless, supply is relatively inelastic, and it is only the relatively high prices visitors are willing to pay that brings many of these spaces into the market. A surge in demand and relatively inelastic supply: elementary economics predicts a substantial increase in price.

Host city officials, league officials, and fans often lament price gouging, but it is easy enough to predict the effect of any law or custom that prevented it: more people renting rooms one, two, or more hours away, fewer people at game weekend events and pre-game events, and more people stuck in worse traffic before and after the game. (Or, perhaps in a language more relevant to host city officials, an effective anti-price gouging campaign would mean a smaller bump tax in local tax receipts from folks attending the game.)

The fundamental issue is the relative scarcity of rooms during the game weekend, and the question is how to match fans and rooms. Letting prices work earns price gouging complaints, but failing to let prices work would surely create worse problems.

About these ads

3 thoughts on “Super Bowl price gouging complaints

  1. I am actually a little surprised. Indy may be a small city for the super bowl, but the super bowl is not the biggest draw that Indy has. Every year the 500 automobile race draws about 4 times as many fans as a football game.

  2. Good point Fat Man. Raises interesting considerations for investment in hotel rooms. The Indy 500 happens every year while the Super Bowl comes much less frequently, so investors can essentially count on race week for future revenue projections and not on repeats of the Super Bowl. Of course, that is one (or two) week out of 52. How many other peak demand events does Indianapolis host? How many periods of peak pricing does the industry need to motivate building more rooms (that will have low occupancy otherwise)?

  3. I can understand increasing the rates a little but what the business owners and cab compaines were doing was just plain greedy. They were charging cover charges at night just to eat and drink in their establishment. Some business offerered “special super bowl menu’s and drink specials” just another way to increase their prices. Cab rates were supposted to be a flat rate for any trip starting or ending in downtown, within a certain vacinity, well my friend was in a $65.00 flat rate group and yet he was turned down by 5 different cabs staing they would not bring him and he finaaly found a cab to bring him and they charged him $140.00 ONE WAY. The cab driver never turned on the meter and told him to get out of the cab unless he would pay that price. It was Sunday evening after the Super Bowl and the crowds were breaking up, he wandered around the town for 2 hours and went to numerous hotels before he had no choice but to pay what the cab driver demanded. People from the hotels were telling him the cab companies were charging $150.00 to bring people to the airport. (from Downtown) In my opinion it was purely disgusting!!!

Comments are closed.