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May 5, 2016

At the Kentucky Derby, Price-Gouging Hotels are the Real Winners

The Kentucky Derby is steeped in tradition, so it’s of no surprise that it would be among the last holdouts against the sharing economy. Last year, the city threatened Airbnb operators with heavy fines. This year, city leaders are grappling with whether Airbnb operators should be required to get a special permit.

Legacy industries hate disruption, and few hate it more than the hotel industry. Lobbyists have tried to squeeze Airbnb operators at every turn – raising issues about pricing and now noise control at major events.

But if you want to know what this is really about, just visit the Econo Lodge in Louisville during Derby weekend. I did last year.

On any other weekend, the Econo Lodge will set you back about $89 a night. And that’s about right, because the rooms are dirty and the noise level in the parking lot will keep you up all night long. But book it during Derby weekend and the price skyrockets to $449 a night. No, it’s still the same crappy hotel (the one where my credit card information was stolen after I used it to pay my bill).

The only difference is supply and demand. And for decades we’ve accepted that because we had no choice. Hotels jack the rates for special events, and just because it’s always been that way we take it for granted. But why? If airlines raised ticket prices by 400 percent there would be an investigation. If a grocery store jacked up the price of a gallon of milk to $16 during a snow storm there would be outrage.

Hotels are nervous that Airbnb is cutting into price gouging. Don’t believe me, just look what a top hotel executive said. Jon Bortz, the CEO of the Pebblebrook Trust (which owns hotels operated by Doubletree, W and others), last year complained that Airbnb is making it harder for hotels to price gouge their guests. According to the Wall Street Journal, he said the rise of home sharing left hotels with less of an “ability to price at maybe what the customer would describe as sort of gouging rates…I’d say we’ve lost a lot of that ability at this point within the major markets where these events take place.”

Are there legitimate issues with home-sharing and ride-sharing services? Sure there are. But it’s laughable that the hotel industry is trying to take the high ground here.

If you want to know what’s wrong with the hotel industry – and why Airbnb will be around a long time – just go visit the $449 a night room at the Econo Lodge in Louisville.

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