Friday, 7 May 2010

Peak load pricing: Rugby World Cup edition

The New Zealand Minister for the Rugby World Cup (yes, such a portfolio exists) apparently reckons that tourists to New Zealand during the Rugby World Cup would prefer that there be no available accommodation than that it be available at high price. From today's National Business Review:
Rugby World Cup Minister Murray McCully has written to the Hotel Association asking it to persuade its members not to risk damaging New Zealand's tourism reputation by over-charging for accommodation during the rugby World Cup.

The event is still well over a year away but there have been reports of accommodation providers in Auckland ramping prices up several hundred percent above usual rates and adding long minimum-stay provisions.
The CEO of Rugby World Cup is more sensible:
Rugby World Cup chief executive Martin Snedden said last month that prices being charged in what would be a peak time were generally reasonable, and organisers were confident that the free market would lead to those overcharging having to reduce their prices or face the prospect of empty beds during the tournament.
We ought, of course, note that some package deals of tickets plus accommodation will see premium prices not because of hotel overcharging but rather because tickets for some events will be at below market clearing prices: the package deals provide a mechanism allowing markets to clear via prices rather than queuing. I'm with Snedden, though. All that's achieved by hotel operators charging less than the market can bear is that some visitors will be unable to find accommodation.

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