Taylor Swift’s recent visit to the city of Pittsburgh left some with a bad taste in their mouths. As one incensed citizen writes in a letter to the editor, “It’s a shame when people visiting Pittsburgh for a reunion, wedding, graduation or some other event have to pay three times the cost of a hotel room because greedy owners are gouging patrons because of a concert at the stadium, which the visitors were not in town for to begin with.”
This complaint is not unique to Pittsburgh. As Swifties rampage across the world, prices of hotels rise in their wake. Dublin hotels were accused of “price gouging” for the dates of an upcoming Swift concert as well. How terrible, right?
The surprising answer is no. While it may be inconvenient that visitors to Pittsburgh, Dublin, or any other city have to pay an abnormally high price for hotel rooms, it’s for the best.
The increased demand for hotel rooms in anticipation of a Swift concert increases the price a hotel can charge for rooms. They increase the price out of self-interest or what is often called “greed,” but doing so clears the market, benefiting those who are more willing to pay for the rooms. Not raising the price would lead to a shortage, otherwise known as frustrated buyers.
Imagine a scenario in which the prices did not rise. Swifties, in anticipation of the concert, book hotel rooms at a severely discounted price. The result? People like our dear letter-writer from Pittsburgh are unable to even get a hotel room, let alone at an upcharge.
Reunion-goers, wedding crashers, and parents of graduating students would be unable to obtain a room, leading to them resorting to a less preferred option, such as room-sharing or sleeping in a relative or friend’s living room. In fact, they might not make the trip at all.
Ultimately, raising prices or as the press calls it, “price gouging,” allows the most eager buyer to obtain a room. I would venture to say that a parent of a graduating student is relatively more eager than a Taylor Swift fan. A Swiftie can see Taylor in another city, wait for the next tour, or just settle for Spotify.
The letter-to-the-editor writer continues, criticizing politicians, stating, “Shame on Mayor Ed Gainey, Allegheny County Executive Rich Fitzgerald and Gov. Josh Shapiro for allowing legalized robbery. There should be percentage limits on increases in supply-and-demand venues.”
“Price gouging” is not legalized robbery; the companies, being the rightful owners of the hotels, have a complete right to charge whatever price they want. To require them to keep prices low is in fact a kind of robbery. The politicians mentioned are all Democrats, and I, for once, am surprised they did nothing. They deserve praise rather than consternation.
Additionally, why is a Taylor Swift concert worth less than one’s vacation or reunion? I am sure there are plenty of young Swifties who would choose Taylor Swift over much of anything else. To recommend a regulation, so that one can obtain a room at a discounted price, potentially deprives a Swiftie of a hotel room. If the hotels are exhibiting greed, then proposing regulations does too. The anti-high price advocates are no better than the hotels that increase the prices in the first place. If the vacationers had it their way, the price of hotels would be $0.00.
Furthermore, little attention is given to the long run of what would happen in a market that bans/regulates price gouging. Resources would be shifted out of hotels and into more profitable ventures, potentially leading to fewer hotels in the future and, therefore, fewer hotel rooms. Future visitors would have to compete more vigorously for hotel rooms than before due to the lower supply.
The invention of new “junk fees” would increase the price of price-controlled hotel rooms, and discrimination based on arbitrary characteristics may take place. The same arguments against rent control apply to the control of hotel room prices as well.
“Price gouging” is when a self-interested company attempts to charge the profit-maximizing price, consequently making the market clear and quantity demanded and quantity supplied equate.
We should not be criticizing the hotels. If anything, we should be thanking them for making hotel rooms available even in times of extremely high demand.