According to an article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don't respond that much to lower rates. 'We've tested this, cutting our rates by $50 [per night], and we didn't see an appreciable response in occupancy,' says Jim Schultenover, a vice president for RitzminusCarlton. Source: Jesse Drucker, "In Times of Beltminus Tightening, We Seek Reasonable Rates", Wall Street Journal , April 6, 2001. Based on the information above, the demand for hotel rooms is?

Question

Bentley Hood

Business

3 February, 12:56

According to an article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don't respond that much to lower rates. 'We've tested this, cutting our rates by $50 [per night], and we didn't see an appreciable response in occupancy,' says Jim Schultenover, a vice president for RitzminusCarlton. Source: Jesse Drucker, "In Times of Beltminus Tightening, We Seek Reasonable Rates", Wall Street Journal , April 6, 2001. Based on the information above, the demand for hotel rooms is?

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Answers (1)

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Lyla Proctor · Answer 1

The demand for hotel rooms is inelastic

Explanation:

An inelastic demand is the one that is not very sensitive to price changes (the price elasticity of demand is less than one). In this case, even though the RitzminusCarlton hotel cut they rates by $50 per night, they did not see a significant response in occupancy. It is not perfectly inelastic because in that case the RitminusCarlton hotel would not have seen any changes in occupancy (they saw a response in occupancy, but it was not meaningful). In the demand and supply graph, an ineslatic demand curve is steeper than the normal one. The more inelastic the more steeper the curve.