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Friday, 18 September 2015

The Price Of Success

Edinburgh is now officially the most expensive city in the UK to book a hotel room in. I can't say that I am surprised, as like many 'socialist' countries, the political elite really like to pamper themselves with all expenses paid trips.

So the rise of the Scottish Parliament in the city, has flooded the land poor city (its surrounded by hills, so new hotels are not easy to locate in the city itself), with hundreds of affluent champagne socialists, of both the Labour and SNP hue. All of whom can claim hotel stays as expenses .... end result, price hikes on the hotel rooms in the city centre.
 
Edinburgh - Worth A Little Extra?

So now apparently, the average price of a hotel room in the city centre of Edinburgh is at £175 per night, £5 per night more than London. Just for comparison, York in third place, charges an average of £102 per night, while Liverpool is an average of £88.00 pn, and poor Blackpool a rather thrifty £57.00 pn.

However it isn't all bad news, the rise of the budget hotels in the UK generally, means that the prices per night are actually falling nationally .... but not quickly enough it seems.

11 comments:

  1. It's like trickle down economics - you'd think that there'd be plenty of profit to be had undercutting the high prices but instead, why compete when you can make more profit by charging as much as the others? A free market doesn't always work for the consumer.

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    Replies
    1. Not when its a fixed supply, with demand exceeding that supply. That is when it becomes the law of supply and demand, and not trickle down economics.

      Law of Supply and Demand

      Generally, if there is a low supply and a high demand, the price will be high, and obversely, the greater the supply and the lower the demand, the lower the price will be.

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    2. Oh yes, supply and demand, the "law" that some like to quote to justify charging twice as much as the goods or service is worth. There's no law which forces a hotelier to charge a reasonable price regardless of what others are charging.

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    3. Actually you don't to have to buy if you think you can get it cheaper elsewhere. Your idea of a reasonable price, will be lower if you are a buyer, and higher if you are a seller.

      The fact that you either can't find it cheaper, or that some people choose to pay up, supports the supply/demand laws impact on the price, because the demand supports it. If not enough people are prepared to pay that price, it either drops or remains unsold.

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    4. A reasonable price doesn't have to differ between the buyer and the seller; goods and services have specific costs and once these costs have been recovered it's in the best interest of the seller to add a reasonable profit which, depending on the business might be between 5-15%. A business making excessive profits risks being uncompetitive and/or losing the trust of it's customers.

      You don't have to buy some things but for a visitor to a city a hotel room can be a necessity. The 'choice' of paying through the nose or spend the night on the street sounds more like blackmail than commerce. It also resembles a cartel or a monopoly which are recognised as unfair and are against trading laws.

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    5. Command side economies, versus free market, was a battle fought in the 1970’s and 1980’s and a battle which was decisively won, when the socialist command economies folded (along with their regimes) by the end of the 1980’s. However it seems that in some quarters across Europe, this argument is being reopened (possibly in the hope that the electorate have forgotten the events of 25 -30yrs ago).

      If you have a command, state economy such as Cuba, or Venezuela, or Zimbabwe, then you see suppliers prices being set by the government. However as you can't buck the markets for long, the end result is shortages, or the removal of products from the shelves. As is in fact the case for all those economies.

      The whole point about Supply/Demand, is that they will come into balance at the ‘correct price’ (whether you agree with that price as being correct or not), so as hotels in Edinburgh are not going bust; ipso facto they are not making excessive profits and therefore not risking being uncompetitive and/or losing their customers. They are obviously charging what the market will support …. Any more, then the rooms would be empty.

      Also ultimately, in the case of Edinburgh hotels or elsewhere, it’s not simply a choice of 'paying through the nose, or spend the night on the street' it’s a choice between paying Edinburgh hotel prices, or staying at a cheaper rate outside the city. Just as it’s a decision to either to buy a house in London, or elsewhere and commute in.

      That's economics, and no one, and no system, has ever been able to suppress this for more than a few decades, and never successfully.

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    6. If the free market works as well as it does it's because it is already regulated, otherwise like any system it would either work very badly or blow up. Our roads are 'free' and when you see the bad drivers you hope they're caught before they cause an accident. More regulation may not be the answer. but it would help if existing regulation were enforced.
      Bernie, Madof is a case in point, he Supplied to the Demand like ten boy racers and unfortunately was not caught before the almighty car crash thanks to the incompetency of the regulators.

      As you rightly say supply and demand price hikes is the way it goes because that's human nature so the solution is for the Council to get it's finger out and encourage competition, if that's not too much market manipulation for you.

      The problem
      with increasing prices is that it's part of the economic fallacy of endless expansion, the business model which says grow or die. While we only have one planet with it's finite resources, this model is unrealistic and self destructive, yet like Football it's believed by many to be more important than life and death.

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    7. I can't agree with some of your arguments, because they are based in part upon false set of tenets e.g. Bernie Madof is a crook, he was a crook under the law while he was selling stocks in a massive Ponzi scheme, and he was arrested, tried and imprisoned for his offences ... so the rules were enforced.

      He would be a criminal under whatever economic model you wanted and was caught .... see Russia, China or India and their massive corruption, as examples of state models beset by Bernie Madoff wannabees .... there, the criminals are only 'caught' when they cross a political line that upsets the rulers, not an economic or moral one. Free enterprise has its excesses, but to some degree over matters such as pricing (which after all is what we were discussing), its self regulating .... Supply and Demand determine prices. State intervention may set some sort of legal framework under which those economic laws operate, but the moment it tries to set the charges, it causes its own failure because supply dries up e.g. Venezuela.

      So if for example Edinburgh Council was 'to get it's finger out and encourage competition, it would have to interfere by:

      (a) Providing scarce public land resources in the city centre to developers, to specifically create more hotel rooms (at the cost of using that land for other purposes) ... a course of action which would only work if this led to over supply and thus forced room prices down as hotels competed for a finite number of occupancy.

      or

      (b) Change the planning laws to force any land or redevelopment opportunities that came up on private projects to be prioritised to create hotel rooms. A state intervention which smacks of a state controlled economy such as that in China of old.

      Finally the 'economic fallacy of endless expansion' is not an economic law I recognise from my 'A' levels. Badly planned businesses may, like the grasshopper of 'Aesop fable', plan only for endless summer, but most good business models include contingency for down turns in demand, as well as the upturns, like the industrious ants.

      Ultimately, no one disagrees that as a species, we humans are exhausting our planets resources (1.5 planets per decade required to meet our demands), even there, there will in the end be a simple matter of supply and demand to balance it out. The three horsemen riding will see to that.

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    8. Ideally the market is self regulating, but then so are the newspapers... !

      Indeed Bernie was a crook but then that's what regulation is there for, whether it's dodgy scales in a butcher's, estate agents (enough said) or conmen who will take your money and give nothing in return. Excluding Bernie is a "real Scotsman" argument.
      The government regulates business where it can't or doesn't itself, giving incentives to attract a needed service to areas where for one reason or another it's not happening "naturally" and punishing unfair traders which include the Madoffs of this world.

      Business is not an entity outside of society, it practically is society, and as such should operate for it's benefit, not suck out it's wealth to another country or put it on 24 red and roll the dice.

      Official model or not, continuous growth is the model that we are operating by and cannot be sustained. If government should do anything at all it should see the danger and steer us away from it.

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    9. Sorry mate, but what has newspapers self regulation got to do with economic laws?

      One is a self censorship (or not), proscribed by political calculation, while the other is an economic law, which applies equally, whether there is regulation (self, political or otherwise), or not. It's this mix of arguments which weaken your case.

      The free-market system of Laissez-faire economics, and a democratic political system, that we live under, worked. Mr Madoff was caught. There is no such thing as a pure free-market system anywhere in the world, so I am not sure what your arguing for or against with reference to Bernie Madoff as a case in point. because his imprisonment seems to me, to be proof that the rules were enforced i.e. that the system however flawed worked.

      My points about economic laws, assumes simply that we are talking about any economic system with some political oversight. Either that is the state controlled systems of market regulation, or the outright direct political interference in the markets that Russia, China or Venezuela represent (to one degree or another), or the western model of the USA and Western Europe, where free-market economies have some regulations.

      It's fairly clear that on this one subject area we simply don't see it from a common point of view ..... however it would be boring if we did.

      It's certainly true that the next few years, both in the UK and Europe are going to be interesting, both economically and politically, as existing systems are challenged and tested, and no doubt we will discuss these and many other issues over the years to come. How the next two years fallout will set the tone for decades to come.

      As you initiated a very interesting debate, the final right of reply will be yours, with your next response.

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    10. My point about Madoff is that the market didn't self regulate him away; he 'traded' for years as a well respected investment broker ruining more and more lives with impunity much like the newspaper industry which avoids regulation because it is "self regulating". Only in theory will the free market eliminate crooks such as Madoff but in practice they can move around and change names making it difficult for even a thinking regulator to catch them - a dumb, economic principle has no chance. Madoff was, finally brought to justice which proves my point that regulation is necessary and could be even better.

      If we don't seem to agree it's perhaps because you appeared to me to be against any regulation and I appeared to you to want total state control over pricing, neither of which is the case. I look forward to our next misunderstanding.

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