The answer, apparently, depends greatly on where you are in the hotel. In the lobby, a one-day pass to use their wireless internet connection costs $10.95. Not cheap, but standard for nice hotels.
Down in the main ballroom, however, the story is very different. A one-day pass to the internet there costs $300!
Economists have a name for this: price discrimination. It means that a company charges different prices for the same product to different customers. Note that despite the use of the word “discrimination,” economists don’t necessarily think of price discrimination as bad — it is just a method for firms to get more of the surplus away from the consumers. If you are the consumer being charged the lower price, you are glad that price discrimination exists. Otherwise, if there was just one price, it would likely be higher than the low price when there are two prices. It is only when you are the guy down in the ballroom that it feels lousy.
The idea behind this pricing structure, I’m sure, is that individuals are the primary purchasers in the lobby and companies that are running meetings are the primary purchasers in the ballrooms. The companies have very inelastic demand and will pay the high price often enough to make it profitable to serve only a few customers. Still, I wonder if the ill-will generated by such a high price is worth it in the long run.
Price discrimination is everywhere, but rarely have I seen a firm willing to be as blatant as the Hyatt. Pricing is an area that economists don’t study enough. I think there is much work to be done in understanding how firms decide what prices they choose and whether those prices are the “right” ones.
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I would be a little surprised if those prices are priced for a 1:1 ratio. That is, though I am fairly confident that the $10.95 in the lobby is for 1 person, I’d be a little shocked if the $300 wasn’t a flat rate in the ballroom for an entire corporation’s users. If it was $300 a head, that really would be exceptional.
I would be a little surprised if those prices are priced for a 1:1 ratio. That is, though I am fairly confident that the $10.95 in the lobby is for 1 person, I’d be a little shocked if the $300 wasn’t a flat rate in the ballroom for an entire corporation’s users. If it was $300 a head, that really would be exceptional.
I learned the concept of price discrimination from an employee at Home Depot while I was shopping for a sink.
I needed an “undermount” sink to go beneath my new granite countertop. This type of sink was priced approximately 50% more than the otherwise identical “overmount” sink. The size, design, materials, etc. were all identical except for the curve of the lip of the sink.
The salesman hypothesized that “The manufacturer figures if you can afford granite over formica, you can afford to pay more for the sink that goes with it…they just want their share.”
I learned the concept of price discrimination from an employee at Home Depot while I was shopping for a sink.
I needed an “undermount” sink to go beneath my new granite countertop. This type of sink was priced approximately 50% more than the otherwise identical “overmount” sink. The size, design, materials, etc. were all identical except for the curve of the lip of the sink.
The salesman hypothesized that “The manufacturer figures if you can afford granite over formica, you can afford to pay more for the sink that goes with it…they just want their share.”
Is the potential ill will worth it? As much as being gouged gets under my skin personally, my guess is that the $300 charges are mostly charged the expense accounts of large corporations and not even questioned.
Great example from Home Depot. I’ve noticed this as well when shopping for stoves – the “slide in” models designed for center islands are outrageously priced, considering the minor difference in shape and control placement.
Is the potential ill will worth it? As much as being gouged gets under my skin personally, my guess is that the $300 charges are mostly charged the expense accounts of large corporations and not even questioned.
Great example from Home Depot. I’ve noticed this as well when shopping for stoves – the “slide in” models designed for center islands are outrageously priced, considering the minor difference in shape and control placement.
I agree with mhertz. I suspect the ballroom price is not a single-user price, but for everyone attending an event in the room. No corporate expense account would tolerate a $300/user/day charge for Internet connectivity.
Many of the hotels I go to these days, especially the cheaper ones like Marriott Courtyards, have free wireless (and/or wired) Internet service in rooms and in public places. On the other hand, fancier hotels feel like they haven’t gouged enough with the room tarriff, so they add on Internet charges. The worse I’ve seen is £25/day in London at a posh hotel.
I agree with mhertz. I suspect the ballroom price is not a single-user price, but for everyone attending an event in the room. No corporate expense account would tolerate a $300/user/day charge for Internet connectivity.
Many of the hotels I go to these days, especially the cheaper ones like Marriott Courtyards, have free wireless (and/or wired) Internet service in rooms and in public places. On the other hand, fancier hotels feel like they haven’t gouged enough with the room tarriff, so they add on Internet charges. The worse I’ve seen is ?25/day in London at a posh hotel.