Supply and Demand article

Essay by savanahbaby December 2006

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The following paper outlines a problem facing consumers and businesses and the lack of physical hotel rooms to accommodate leisure and business travelers. According to an article from the May 2006 issue of Corporate Meetings & Incentives there is a demand for hotel rooms that just don't exist, the demand has exceeded the supply of rooms and the consumer is paying a higher price for a hotel room due to lack of availability. The anticipation in the demand of hotel rooms ten years ago did not justify paying high prices for real estate development of new hotel units if the demand was not there at the time (Kovaleski, 2006).

I believe this article shows that as supply decreases but demand increases the price will follow with an increase as well. The article cites some of the reasons for the decrease in supply of hotel rooms on several factors such as high cost of real estate and high construction costs.

This shows that other areas such as construction labor, cost of materials, and cost of land can directly affect the supply of any good or service. Some of the existing hotel rooms had also been converted into luxury condominiums therefore decreasing the number of rooms available. The article also points out that investors do not want to make investments to build high-end hotels in larger metropolitan cities because of the costs of the investment. All of this leads to the consumer or business paying a higher daily rate for a hotel room than they would have just 2 years ago. Some cities according the article are developing hotels to support their convention centers, if the rooms are not available, businesses will not hold a convention (Kovaleski, 2006).

Another article from the higher gas prices have not had an affect on...