The recent uproar over the sale of Oasis reunion concert tickets has led to an investigation by the UK Competition and Markets Authority (CMA) over whether Ticketmaster has breached consumer protection law.
Oasis fans watched in horror as ticket prices spiralled upwards before their very eyes in a blatant example of surge pricing.
Online sales pressure tactics, such as pop-up messages stating, “only 3 rooms left at this price” or “3 people looking at this booking too,” are already under scrutiny by the CMA.
Now it is the turn of dynamic pricing, or more accurately, surge pricing. Whether either of these investigations will have any legislative teeth remains to be seen.
Although the CMA says it is now investigating “so-called dynamic pricing” it is important to make a distinction between the Oasis ticket-buying experience and the pricing strategies that airlines and hotels have used for decades.
Surge pricing vs. dynamic pricing
With surge pricing, high demand pushes prices up in a short space of time (the Oasis tickets sold out in a matter of hours), whereas with dynamic pricing, depending on various factors, prices can go down as well as up.
Hotel consultant Melvin Gold commented: “Most hotels make their inventory available a year in advance. Rates start low and rise as you get nearer to the date and the hotel gets fuller. If you are organised and want a particular hotel a year in advance, you will get that room cheaper than someone who books at the last minute. People understand that” he explained. “The situation is completely different with Oasis tickets because everyone knew they were going to sell out.”
Ticketmaster started using a surge pricing algorithm in 2022. It appears that the algorithm was let off the leash on Oasis fans and left to roam free.
Hoteliers have tended to be much more cautious and sceptical about the recommendations put forward by pricing algorithms. This is because they are operating in a constantly shifting and nuanced market that, unlike Oasis tickets, rarely offers a guaranteed sellout.
Dynamic pricing is as much about distribution as price, explained Robert Holland, managing director, UK & Ireland, HotelPartner: “It’s about ensuring that you know when demand will be strong and when not so strong so you can take applicable action.”
As a real estate asset class, the ability of hotels to flex their prices on an ongoing basis has been a distinct advantage, allowing owners and operators to increase revenue during the post-pandemic period of high costs and inflation.
ADR trends and market limits
UK second quarter ADR increased by 4.3% to £112 in the regions, according to Hotstats. Is there a ceiling to ADR increases? The ceiling is what the market will bear, so in the same timeframe, London ADR has dipped by -1.2% to £237, indicating the ADR ceiling was reached in the capital.
Is the Ticketmaster debacle a warning to hotels to exercise caution or an invitation to push prices as far as they can go?
Hotels in Liverpool and Edinburgh benefited the most from this year’s Taylor Swift concerts with ADR nearly doubling and occupancies at around 90%, according to CoStar.
James Bland, managing director at consumer research group BVA BDRC, commented: “Hotels are businesses – they don’t exist for the common good – and so they are at liberty to set their prices as they see fit. Consumers are not compelled to purchase a room at any given price, and only occasionally is demand so high that there is no alternative. It is, though, those occasions that grab attention, and if the sector wishes to continue to enjoy dynamic pricing in a low-regulation environment, it has to refrain from pushing its luck.”
Cristina Balekjian, director of UK hospitality analytics at CoStar, added: “Recent reports about hotels cancelling rooms to sell them for much higher prices may put many consumers on high alert. Hoteliers will need to tread carefully to strike the right balance between capitalising on such opportunities and the bad publicity of unfair charges.”
Oasis and their management were at complete liberty to decide how to sell their tickets. In contrast, Taylor Swift has chosen not to deploy surge pricing. Hotels too, are entirely free to decide how to sell their rooms.
In the context of total annual revenue, filling a hotel with Oasis fans for two or three nights is unlikely to be a financial game-changer.
Given that Oasis fans have already been fleeced on their ticket prices, perhaps the right thing to do would be to offer rooms at normal or reasonable prices. Who knows, such an act of kindness might even generate some good publicity.