While checking out of a hotel room the other day, I noticed that the room rate posted on the back of the door was way more than the price I paid. In fact, it was more than double.
I thought about how often I’ve looked at this rate in amusement, since it’s never a reasonable price. Sometimes it is utterly ridiculous.
It occurred to me that the difference between the rate on the door, and the rate I paid, is the difference between a planned economy and the market. In many states, the posted rate is assessed by the state government, in an effort to protect consumers from price gouging. The state inspectors come into a hotel, look at the quality and amenities, and decide how much it should cost. On the other hand, the price a hotel actually charges is determined by the managers, who look at the vacancy rate, weather conditions, local events, and what other hotels in the area are charging. They set a price based on all these factors, trying to fill up the hotel at the best price they can get.
The difference in price is the difference between socialism and capitalism. If every hotel were run by the state, they would all charge the price on the back of the door. Travel would be way outside the budgets of most consumers, something done for necessity rather than leisure. Hotels would suffer from chronic vacanc~ and the sparse revenue stream would make repairs and upgrades rare. Eventually they all would become musty and inhospitable.
This summer, when we all take to the road for our annual summer vacations, and check into the cheerful motor inns that freckle the nation’s highways, it will be good to remember that these affordable, comfortable accommodations are just another blessing of capitalism; that it is the invisible hand turning down the sheets, and leaving the light on.