Minibar Economics
Why you should stay at hotels that overcharge for drinks and Wi-Fi access.By Tim Harford
Posted Saturday, Feb. 17, 2007, at 6:29 AM ET
There are, of course, two types of charges: the ones you see coming and the ones you don't. I write this from an inexpensive hotel room, but you would not guess that looking at the price list in front of me. Two dollars a minute for phone calls (price on the Planet Earth: 10 cents), $20 for a day's wireless access (Earth price: $20 a month), $4 for a chocolate bar. It's like being in some bizarre alternate universe. If I'd known in advance that the hotel was going to try to pick my pocket, I might have considered staying somewhere that cost a little more up front and charged terrestrial prices for all the add-ons.
Perhaps, however, these hidden extras aren't quite so bad. In fact, I think the world might be more expensive—and more unfair—without them. If that seems counterintuitive, it's because we tend to assume that the alternative to hidden charges is no charges at all.
That seems unlikely. The hotel room is fairly cheap because the hotel wants to get me through the door, hoping that I'll spend more lavishly on the phone and the minibar than I will on the room itself. The more incontinent my spending habits, the more it is worth having me as a guest, and the lower the advertised price will fall. The logical extreme is the complimentary VIP suite in Las Vegas for the high-rolling gambler.
So, the large print giveth, and the small print taketh away. The interesting question is whether the effects balance each other out. You might expect that hidden charges would blunt the forces of competition. They certainly can, to the extent that they make price comparisons more difficult—and that effect is likely to be pernicious. Observing that one hotel room is $100 and another is $120, I can pay my money and take my choice. It is more difficult to make a straightforward comparison if I know that I could be charged whimsically high rates—or, perhaps, nothing at all—for wireless access or breakfast.
Article URL:
http://www.slate.com/id/2159743/
