Major sporting events can substantially boost demand for hotel rooms and, given the difficulty of building new hotels on short notice, lead to price hikes and consumer complaints about price gouging. As I wrote four years ago, “Super Bowls usually produce price gouging complaints,” but the complaints were especially high that year given the selection of Indianapolis, a relatively smaller market, to host the game.
Of course, as I noted then, rooms to rent are not in perfectly inelastic supply as non-conventional spaces from spare rooms to whole houses become available at a price. The rise of Airbnb has simply greased the wheels of non-conventional supplies as noted in a number of news stories from the last several months:
- C. Karmin, “Airbnb Crimps Hotels’ Power on Pricing,” Wall Street Journal, September 29, 2015.
- N. Statt, “Airbnb hosts are having a hard time gouging guests for the Super Bowl,” The Verge, February 5, 2016.
- V. Nguyen, “Indianapolis homeowners using Airbnb to rent rooms for Indy 500,” WISHTV.COM, May 25, 2016.
- S. Fu, “Kayak CEO Hafner: Airbnb Combats Hotel Price Gouging,” Bloomberg, July 19, 2016.
- A. Griswold, “Airbnb is making it harder for hotels to price gouge customers,” Quartz, August 16, 2016.
And by “greased the wheels” I mean “used technology to match willing seller with willing buyer and facilitate a transaction among strangers.” Hotels have been a little slower to use city politics to come after Airbrb than taxi companies were in going after Uber and Lyft, but they’re catching on to the challenge the internet brings to their business.