Here’s a basic proposition and you can tell me why I am wrong in the comments if you disagree: If a hotel can sell a room in Dublin during the Oasis concert for €400 for the night, and if all hotels are full in Dublin (there are 25,000 rooms in total) at that level of marginal price…. then €400 is a perfectly fair price for that hotel room.
The value of anything, after all, is determined solely by what somebody else is willing to pay for it. If hotels in Dublin could not sell their rooms at €400 each, then the price of those rooms would fall to a price where the room could be sold while still making a profit.
Politicians never see things this way, naturally. Which is one of the many reasons that politicians are a dreadful species of thing whose impact on society should be minimised at all costs. Here is Enterprise Minister Peter Burke, bloviating:
MINISTER FOR TOURISM Peter Burke has criticised hotels in Dublin for inflating their prices when there are large events on in the capital and said it is something he will be addressing in October’s Budget.
Burke said it is an issue that is damaging to Irish tourism and is “absolutely not acceptable”.
He tempered his comments by saying it isn’t something all hotels do, but that it is nonetheless “unacceptable”.
“When you see extortionate prices, be it for a concert or for a specific game, it really sends out a bad message for Irish tourism. So I would absolutely call them out on that,” Burke said.
“Areas like this are very much at the forefront of my mind in decisions that we make with the Minister of Finance and my government colleagues in the coming months,” he added.
The Minister seems to be saying here that the Government will “do something” about hotel prices in the budget. Really, there are only three things that the Government can do to impact hotel room prices: They can, first, provide more hotel rooms. This might be a slow process.
They can, second, limit the number of people allowed to seek hotel rooms in Dublin at any one time. This might be impractical.
Or they can, third, place some kind of legal limit on the price of a hotel room for a night that is below the apparently unacceptable level of €400. For the purposes of this article we will assume that this is what some bright spark somewhere is contemplating.
We can assume it because the Government quite likes price fixing. It has already done it in the rental market with rent caps, to no meaningful impact on the availability of housing. Applied to hotel rooms though, we might perhaps see why it is such a bad idea.
Demand for hotel rooms, unlike other commodities, is not perfectly constant. There will be times – a random rainy Tuesday in April for example – where demand for hotel rooms in Dublin is very low, forcing the hotels to offer deals and compete on price for what limited customers are available. There are other times when demand is so great that each hotel could fill itself twice. If you own a hotel and wish to pay your staff constantly and justify your existence on those rainy April Tuesdays where the whole building runs at a loss, you have to cash in when the going is good.
If you prevent hotels from making money when they can make money the most efficiently, the net and natural effect is that you will have fewer hotels. If by contrast you let them make extortionate amounts of money from public demand and run healthy profits, then more people might decide that hotels in Dublin are a good investment, meaning you will have more hotels.
This is not difficult. It is, as they say, basic economics.
As to the general public’s complaint that prices are too high, the simple solution if something is outrageously priced is not to buy it. I cannot be the only person in Ireland who has, from time to time, looked at hotel prices and decided to cancel a trip or more likely, move that trip to a different weekend. But if going to an Oasis concert is important enough to you that €400 is worth the money, then we should all applaud you and wish you a good night. It is your money, and what you do with it is your responsibility.
The hotels here are not acting irrationally. They sold every available hotel room for the Oasis concert. They made money which will pay their staff. This is not something scandalous. It is basic “economic activity”: People buying things they desire at prices they are willing to pay.
It does not need political interference.
As for the Minister’s assertion that the prices “send a bad message about Irish tourism”…. Well he has that entirely backwards. Nobody says that the price of a Caribbean Holiday sends a bad message about the Caribbean. Nobody says that the price of dinner in a top Paris restaurant sends a bad message about Paris.
No, price is a reflection of demand. If hotel prices in Dublin are extortionate, that is simply because a lot of people want to go to Dublin on the date in question.
The Government doesn’t actually need more people to come to Dublin if hotel prices are at that level. The fact that they are at that level says that Dublin is in demand. Artificially lowering the prices won’t create more demand for Dublin – it will just deny livelihoods to people living and working in Dublin hotels.
This is an area (one of very many) that would benefit from politicians shutting up. Not from them interfering.
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