Price gouging or good business?

May 12, 2010 at 2:53 pm Leave a comment

The recent turmoil caused by Iceland’s infamous ash cloud saw travellers stranded in every corner of the globe, in urgent need of somewhere to stay. This unfortunately led to some opportunistic accommodation providers resorting to ‘price gouging’, upping their prices to take advantage of guests who had no other option.

Similar accusations have been made towards a number of hoteliers in South Africa, whose prices have risen dramatically for guests making bookings during the FIFA World Cup.

So what is the difference between seasonal pricing and price gouging? Is it fair for any kind of service provider to raise their prices for the times in which their product will be most in demand? From the customer’s perspective, it seems greedy to ask for more money at a time when business is good.

Business owners would reply that this it is simply good business sense. It is, after all, the way the business world works. When demand is high and supply is low, prices go up; when demand is low and supply is high, prices go down.

A B&B, for example, will find that it needs to sell a certain number of room nights at a certain price each year in order to survive. These prices will be set based on what their business costs are, what the competition offer and what profit margins they must reach for the business to make financial sense.

A B&B who sets rates of €75 a night may find that these rooms fly off the shelves in summer but are slow to move in winter. Raising the rates during peak times allows a B&B to lower the rates in low seasons, hopefully tempting more guests while still being able to reach that average income of €75 a night.

This seems reasonable, but what about when prices are seen to more than double when some kind of special event is taking place in the area? Is this price gouging or just good business?

Are you a B&B owner with seasonal rates? Are you willing to barter with guests who question them? Or are you a booker who has been stung by overinflated prices? Share your stories or tell us your thoughts below.

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Entry filed under: Uncategorized.

Today’s Top B&B: Myoe Guesthouse in London, England Featured destination: Carcassonne

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