Families Displaced By Storm Accuse Hotels Of Gouging

Over this past weekend, some crazy rains tore a path through a portion of the Mid-Atlantic, leaving entire areas without power or other utilities and forcing some residents to turn to hotels for shelter. But some people in New Jersey have accused local hotel operators of trying to cash in on area residents’ misfortune.

One man says that when he looked at the room rates for one Wyndham-operated hotel, rooms were going for around $79 a night, but when he went to check in, suddenly the hotel wanted around $100 more per night.

The Fox affiliate in Philadelphia reports that the average price listed online for a room at that particular hotel had been around $67 a night.

And at the hotel next door, the average online listing was $110 per night, but when the reporter called to book a room he was told it was actually $189.

Both the general manager of that hotel and the owner of the first hotel we mentioned blamed the skyrocketing rates on the busy holiday season. However, neither hotel could provide prices from last summer to compare to these numbers.

In what is surely just a huge coincidence, shortly after being visited by the TV news crew, the hotel rates dropped back down to reasonable numbers.

Even if the hotels weren’t actively out to gouge consumers, they probably want to avoid the appearance of impropriety, as the New Jersey Attorney General’s office issued a statement yesterday warning businesses in the affected areas to not gouge residents, not just because it’s a crappy thing to do, but because it’s also illegal.

According to New Jersey law regarding price gouging during a state of emergency, anyone charging in excess of 10% higher than they normally would faces civil penalties of up to $10,000 for the first offense and $20,000 for the second and subsequent offenses.

And each individual sale would be considered a separate offense. So even if a hotel only gouges four guests, that could be up to $80,000 in penalties.

Philadelphia News, Weather and Sports from WTXF FOX 29

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  1. mtarget says:

    We were in Ohio when it hit and saw gas prices at some stations take a big jump too…

    • Blueskylaw says:

      So much for the supply and demand theory of big business.

      • Lyn Torden says:

        Demand is higher because people don’t know if the supply will be there tomorrow. Supply is incidentally down, in some areas way down, because so many gas stations haven’t figured out that they could run a generator.

        • Kestris says:

          You’ve never worked at a gas station, have you?

          You can’t simply hook the gas pumps up to a generator. It doesn’t work that way.

          • doctor_cos wants you to remain calm says:

            What, are they powered by steam?
            Where do you think the electricity that normally runs them comes from? That’s right, it’s a GENERATOR. A really big generator, but I think your snide was a misunderstanding of scale as well.

            • 180CS says:

              Exactly. There’s a few stations around my area that remain operable when the power goes out. Low and behold, it’s usually because they usually have a generator on site.

      • AustinTXProgrammer says:

        But this is supply and demand. We have LAWS in place intended to freeze prices during natural disasters because we don’t want people gouged by the true market prices. For something with a fixed supply like hotels this is probably ok.

        For something with an elastic supply it’s not so good, as the shortages it causes might not be there with higher prices.

        • Blueskylaw says:

          There is no shortage of gasoline in this country and you can buy as much as you want so when they raised the price of gas it was gauging at the local level. If there were shortages across the country then I could understand the supply and demand argument. This might be splitting hairs but it’s not always easy to understand.

    • Velifer says:

      Keep your receipts and give the attorney general a call. Last time that happened here there were refunds and sincere apologies from gas station managers that didn’t want to be thrown into PMITA prison.

  2. Blueskylaw says:

    Hotel Philosophy: Never let a good disaster go to waste.

    • Lyn Torden says:

      It’s already standard practice to have a demand based pricing tier. If you reserved when demand was low you lucked out. But as the hotel/motel reaches high percentage of full, the guests taking a room then get a price based on the percentage full. This pricing model is common as a means to finance building an even larger hotel/motel.

      FYI, the pricing structures are also based on anticipated demand, such as when major local events are expected to bring in more people. Then even those getting in when only a small percentage has been taken still have higher rates.

      This higher rate structure is not gouging, but it might look like it is. Gouging is when the demand is suddenly so extreme, as it is now in the effected areas, and the rates go “off the chart”.

      The thing to remember is the rates at 10% occupancy and the rates at 99% occupancy are generally different on “overbuilt” hotels. Keep in mind if they didn’t use the overbuild financing model, then the hotel might only be half the size.

      • Blueskylaw says:

        How did Sam Walton ever make his billions? The more he sold the more he lowered his prices. Insane, right?

        • JJFIII says:

          And for the VAST majority of his products, he can sell those items that do not sell today, the next day or day after or even the day after that. If a hotel does nto sell a room tonight, that opportunity cost is lost forever. It can never be reclaimed.
          I would also say what Sam Walton has done to the middle class in this country is disgusting. He has WalMartized everybody into thinking cheaper is better, quality be damned. His company pays shit wages and uses their size to buy up huge tracks of land and undercut competitors who do not have the purchasing. In fact. I would say the people selling at a higher price to Wal Mart competitors are the ones who are price gouging. The company breaks even on Wal Mart sales and then rides the backs of smaller businesses to make up the difference.
          I would gladly support laws that say you must charge all customers the same amount regardless

          • Blueskylaw says:

            Gasoline can be stored. The more they sell, the more of a discount that should be given. My local store sells half gallons of milk for $2.99 each or 2 for $5.00. Since I demanded more than one then shouldn’t they have raised the price to maybe $3.50 each because of increased demand and not given me a discount?

    • YouDidWhatNow? says:

      Business Philosophy: Never let a good disaster go to waste.

      Political Philosophy: Never let a good disaster go to waste.

      FIFY – take your pick.

  3. CrazyEyed says:

    Odds are, if there’s a SOE, people aren’t traveling to the area; so the argument that it’s “high” season to justify higher costs seems bogus to me. Good luck proving it though.

    • MrEvil says:

      Seriously, who the hell in their right mind vacations in or near a disaster zone?

      “Hey honey, you know what we haven’t done in a while? Checked out the devastation of a natural disaster!”

      “That sounds like a fantastic idea, lets book a couple hotel rooms and pack up the kids!”

      The only people needing hotels in or near disaster areas are relief workers and displaced residents.

      • RandomHookup says:

        Here’s the flip side of the story from NPR this morning:

        http://www.npr.org/2012/07/03/156174905/wildfires-hurt-colorado-resorts-business

        This fellow will see any profit for the year disappear, even though there are still tourist options in the area.

      • Velifer says:

        My friend out helping free his neighbor from a car with a tree on it had many people take his picture. Not one of those fuckers offered to help. Damn tourists.

      • RenegadePlatypus says:

        You make no sense – The only people needing hotels near disaster areas are relief workers and residents? That would imply that nobody near a disaster area is ever a non-resident…. soooo…. probably no non-residents anywhere near San Fransisco when that earthquake hit, right? What you are saying is that tourists or business travelers magically know when a disaster is going to hit and don’t come near a place where disaster is coming.

        “Hey honey, you know what we haven’t done in a while? Checked out San Franscisco!”

        “That sounds like a fantastic idea, but I think there is going to be a natural disaster in a couple days so let’s go to da U.P. instead, eh?”

      • CrazyEyed says:

        MrEvil: If anything, Hotels should make it more affordable to attract those displaced by the storms. Might actually reach full capacity during a time vacationers are fleeing or avoiding the area due to a disaster. Not to mention better PR & Respect. The only travelers in the area might be the ones stranded prior to the storm or ignoramuses who take last minute vacation plans without checking the news/weather.

  4. GaijenSoft says:

    Wow, that hotel owner looked really sleazy

  5. incident-man stole my avatar says:

    Special THANX to http://www.waysideinnmd.com/ for taking great care of us while BGE keeps our power off… they didn’t raise their rates!

  6. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    Keep your receipts if you think you’ve been gouged. I remember back on 9/11 gas went to $5+ per gallon in a few hours, and the stations were later forced to give refunds because they were gouging. My husband was trying to deliver a new motor home to Alberta that day and called me when he saw the price skyrocket at a truck stop so I could go fill out our vehicles in case the price hikes hit here in PA.

  7. Extended-Warranty says:

    No one has the right to a hotel.

    Higher demand is going to incur higher costs.

    • dolemite says:

      VA and other states are under a state of emergency. You can’t charge extra for necessities while under state of an emergency, it’s against the law.

      • Lyn Torden says:

        However, “overbuilt” hotels are structured with percentage tier financing. There is a base size they would build a flat rate hotel for. Then additional separate financing would pay for added capacity to be built (even during initial construction). Their payback is structure for the higher percentage.

        Say you are building a 100 room hotel. Say I’m rich and want to finance building an “overflow capacity” of 80 more rooms in exchange for charging a higher rate for “MY rooms” which are only occupied when over 100 guests are booked in. MY part of the hotel would be less used, and to recover MY investment, MY part has to charge a higher rate when it is used.

        THIS is how hotels get “overbuilt” to provide those higher peak capacity levels. If this scheme were not used, we’d have maybe HALF the overall capacity in the hotel market as we do now.

        Gouging needs to be based NOT on if the rate is higher than some other day (rates always vary day to day and based on demand), but whether or not the rate during the emergency declaration exceeded what would normally be expected in an ordinary 100% demand day.

        Think about it like this. I own a special hotel that is CLOSED most of the time and only OPENs up during the few (maybe 20 per year) high demand days I expect I can fill up. I have staff on call that are paid 2 to 4 times the rate of regular hotel staff so I can be sure they will come in. My room rates are ALWAYS SIX TIMES the rate of the hotels near me. Now, should I open up during the emergency or not? Should I still charge the same rate I do or not?

        What is really going on is that “multiple hotels” like this are just built as a SINGLE multi tier hotel to cut overall average costs and allow all the investors to gain from a common chain affiliation.

    • AstroPig7 says:

      What’s that? You need food? Lucky you, I happen to sell sandwiches for $50 apiece. Of course, they’re normally $3 each, but a fellow has to make money.

    • SabreDC says:

      I disagree. Assume you have to competing hotels near one another in some random tourist spot: Hotel A and Hotel B. It is summer so the hotels are thriving operating around 90-95% occupancy. Suddenly, Hotel B has to shut down because of a natural disaster/power outage and Hotel A is still operating. How has Hotel A’s costs increased to the point where the remaining 5-10% of free rooms requires a 125% price increase?

      Operating Hotel A at 100% capacity will incur the same costs regardless of whether or not there is an added demand due to Hotel B’s unavailability. This is just a way to make more money because people have fewer choices. It has nothing to do with added costs. If there was no natural disaster and tourists flooded into this hotel simply because of good service/word of mouth, I highly doubt that they’d raise their rates by 125%.

      • NeverLetMeDown2 says:

        Why do you keep referencing costs? Costs are irrelevant. Prices are set by relative demand, costs having nothing to do with it. If you got a new car, with better gas mileage, so that your commuting cost dropped, does that mean your employer should cut your salary? After all, your cost declined, so prices should too.

        Costs are only relevant as a floor on prices – nobody (except in very specific circumstances) will price below marginal cost. They have nothing to do with how high prices could go.

      • room13 says:

        More workers are likely needed. IF they had expected to have a low occupancy and then all the sudden the were 100% full they would need extra workers right?

    • castlecraver says:

      Anti-gouging laws have been on the books for some time.

      Nobody has a right to ignore the law.

      Don’t like it? Don’t set up shop in that state. Or try to get price gouging statutes repealed and see how well that goes over with your customers.

  8. Reader101 says:

    Every hotel we tried in MD and VA was charging at least double their usual rate. $250 for a distant suburban DC basic hotel room is crazy….even for the holiday week.

  9. neekap says:

    At least those hotels dropped the price. There are a couple of hotels here in Ohio that do the old bait-and-switch and are raising rates on people after they check in. Best part? The hotels hired off-duty cops to keep reporters off the premises, and kicks out any guest who complains about the price gouging.

    http://myfox28columbus.com/shared/newsroom/top_stories/videos/wtte_vid_18291.shtml

    • AustinTXProgrammer says:

      Not even the sense to take down the sign advertising the lower rate… That owner deserves to be fined into personal (not just business) bankruptcy.

      I’m surprised the police were so willing to do the owners dirty work.

      • SabreDC says:

        Is it even legal to “hire” a public employee to work for a private company while representing the municipality (i.e. wearing the uniform, identifying themselves as a municipal police officer, etc.)?

  10. HogwartsProfessor says:

    Some places here got in trouble for this after the 2007 ice storm.

  11. Grasshopper says:

    “According to New Jersey law regarding price gouging during a state of emergency, anyone charging in excess of 10% higher than they normally would faces civil penalties of up to $10,000 for the first offense and $20,000 for the second and subsequent offenses.

    And each individual sale would be considered a separate offense. So even if a hotel only gouges four guests, that could be up to $80,000 in penalties. ”

    (1 x $10,000) + (3 X $20,000) = $70,000

  12. Kestris says:

    Sadly, this does not surprise me.

    Luckily, here in SW Virginia, gas prices haven’t increased, though ice prices have, as several areas are still without power here. Case in point- go 2 blocks down the road from my house and there’s no power still.

  13. lehrdude says:

    I always thought that a hotel has the right to charge the ‘maximum room rate’ at any time it wants. That’s why the maximum rate is displayed on the door of every room. As long as the rate being charged was not above that listed rate, it should not be considered gouging…

  14. physics2010 says:

    It’s not gouging as long as they don’t exceed the maximum posted rate. i.e. there is a rate posted inside every room that indicates what the maximum charge for the room can be.

    • bikeoid says:

      Agreed – this is all most likely a result of the automatic “Priceline” market pricing booking algorithms.

  15. cf27 says:

    Silly….. The hotels are going to fill up. The only real question is who are they going to fill up with?

    If Hotels increase prices, then the people who really need to get out of a hot house — think families with infants or the elderly — will be willing to pay more, while those of us for whom it would just be nice will be deterred by the higher prices.

    If Hotels can’t increase prices, then they will just fill up with people who don’t really need the room.

    [Somewhere along the way, I’m sure somebody’s going to say “But, they’ll fill up with the rich, not with those who really need them.” Two points: (1) the rich also don’t like spending money unnecessarily — that’s generally how they got to be rich; and (2) those who can just shell out the hotel money without blinking generally have much better options — like backup power at their homes or vacation homes.]

  16. AnonymousCitizen says:

    I believe most states have laws against price gouging. Time to talk with the attorney general’s office.

  17. TBGBoodler says:

    I have to give credit to Marriott for NOT doing this. We headed out of town Saturday morning for an impromptu getaway after our first night without power (having lost it during the freak storm late Friday night). We were not totally outside the affected area, but the Marriott SpringHill Suites still offered great rates.

    When we got back on Sunday our direct area, still greatly affected by the outages, Marriott’s TownPlace suites gave us their cheapest “holiday rate” and didn’t even make me guarantee it with a card. I just had to call or check in before 6 pm.

    [Just got the word that our power is back on! Three days without A/C in the 100-degree heat is brutal. Even in the days when we didn’t have air conditioning, at least we had fans!]

  18. km9v says:

    Hotel prices have to be posted on the back of the room door. If the price charged doesn’t exceed that amount, nothing illegal has occurred. Granted, I’ve never paid rack rate for a hotel room.

  19. crispykickz says:

    How is this news? Hasn’t it always been the case that the price online is cheaper than when you call directly? In my experience that has always been the case. Sometimes they may match up, but I don’t expect that.

  20. donovanr says:

    Attorney General and Yelp sound like two great ingredients for some special sauce.

    Personally I typed a crappy yelp review right in front of a manager and told him that while he didn’t know about yelp that the hotel’s PR people would give him a lesson later that week.

  21. nikalseyn says:

    It’s called “supply and demand.” If you don’t like the rates, don’t try to stay at that hotel/motel. Simple. I was driving thru North Dakota last year and there were no places to stay within a couple of hundred miles of my destination. I finally ended up at an AmericInn for $250 per night. Outrageous? Yes. But, they had this one room and I was in need. I paid it. However, I will never, ever patronize that chain again. My choice.

  22. Nighthawke says:

    I guess the motel managers were gunning for dental work, for their guests were about to punch their teeth in.

  23. soj4life says:

    Almost $200 a night for a hotel in vineland? That is gouging, there is nothing around there that is that popular to justify that price.

  24. depalma13 says:

    The problem with price gouging laws is it only affects the business side. Consumers with the government imposed discount can purchase more than they need during an emergency. Thus leaving short supplies for many others.

    A hotel that is forced to keep it’s rates at $100 will sell out quicker than if it is allowed to raise it’s rates based on the demand of the emergency. Limiting the number of rooms a consumer can rent should also be a part of any price gouging laws.