FOR those exhausted by the festive season, now is the time to book a holiday. Hotels in New York’s Times Square cost four times more on New Year’s Eve than they do just a week into 2016; a room at the cheapest four-star property in Cancún in Mexico on December 31st was half as dear by January 7th.
The economics behind this price crash are simple: hotels are expensive to build and staff, and demand for them is seasonal. Only by ramping up prices at peak times can they be run profitably. But seasonality inflicts wider economic costs than eye-watering bills. Tourists find other destinations because rooms are full on their desired dates and, despite lower prices, inventory goes unused during the off-season. One-off events like sports tournaments, concerts and conferences can exacerbate the problem of mismatched supply and demand, by flooding cities with visitors for just a few days.
The advent of the “sharing economy” should offer a solution. Just as Uber’s surge pricing draws part-time taxi drivers onto roads at rush hour, room-rental services like Airbnb, HomeAway and Onefinestay should allow a city’s supply of...Continue reading
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