This story was posted on another website. <BR>http://travel.guardian.co.uk/news/story/0,7445,773654,00.html<BR>Regards, Walter

Hi Walter<BR>Thanks for the post. I'll be in Greece in three weeks, so it's good to know what to expect.<BR>Happy travels.<BR>Chryso

hmm, maybe the Greeks are not quite clear on the concept (with apologies to Earl Boffo).<BR><BR>If demand is low you're supposed to LOWER prices to attract more visitors, not RAISE prices to repel even more tourists ...

Has anyone experienced this soaring prices over the past month? Is it as blatant as the article insists?

I read the article and wondered myself about raising prices in the face of falling demand. Tom raises an excellent point.<BR><BR>However, the merchants are probaly looking at total revenue.<BR><BR>The elasticity of the demand curve is a factor here involving total revenue.<BR>If prices rise by 50%, is there a co-related drop in units of whatever sold?<BR>If a rise in prices is followed by a only a slight decrease in demand, then total revenue might actually increase in the short run. <BR><BR>For example, lets assume that at $100 a night a hotel can sell 50 rooms.<BR>That generates obviously $5,000 in gross revenue. Lets say the hotel keeper ups his price to $150, but demand only falls to 40 rooms, producing $6,000 in gross revenue. The hotel keeper has actually gained revenue while the number of rooms sold dropped. Given that his overhead for cleaning staff probably dropped as did the cost of towels and sheets, the hotel keeper probably will make more profit.<BR><BR>On the other hand, if the hotel keeper could only sell 25 rooms at that price, he suffers a big drop in revenue.<BR>I doubt if the offset in overhead costs would leave him in good financial position. <BR> <BR>The success of the price strategy is purely a function of the slope of the demand curve -- a concept known as elasticity.<BR>I have no idea whether or not the demand curve in the Greek islands is elastic or inelastic.<BR>It is probably highly seasonal. A big change in price right now probably has minimal impact on demand, but in 6 to 8 weeks, the situation might totally flip around when the summer demand falls drastically. <BR><BR>At any rate, it seems like a very short sighted policy. The cob web theorum type of demand for seasonal goods comes into effect. Word gets out that the place is as expensive as the devil and demand drops because tourists start going to Turkey, which should fry the Greek foreheads no end.<BR>The Greeks the following year drop prices drastically to bring back customers. So the price curves start to gyrate. I wonder how many Greek island hotel keepers figure up cost curves?<BR>

PS and PPS and PHD (piled higher and deeper. If a small decline in price leads to a big increase in quantity sold, the elasticity is high.<BR>If a slight increase in price results in big drop in quantity sold, the elasticity is low.<BR>Is there an economist in the house who can comment intelligently on this topic?<BR>Or do we lay folks have to struggle with percentage changes and delta streams?<BR><BR>Also when pile height equals knee height, it leads to TFS -- time for shovel.<BR>When PHD (piled higher and deeper) rate exceeds SHOT (time required to shovel it out), then ET = critical, where ET is evacuation time.<BR>It is too deep for me. ET<BR>

All great stuff, but I'm sure that Greek hotel owners don't think in quite those terms. They see that demand is currently high, assuming that it is or that they think it will be, so they raise prices. If they guess wrong they have shot themselves in the finacial foot in both the short and long-term.

Yep - we were in Paxos in June and could not believe the prices. Especially since we had been there the previous September. Everything had taken a hike in price. Even though Paxos is considered one of the more expensive destinations in Greece - because the island is so small, everything has to be imported - the price hikes were unreal. Everyone - apart from the British, because the pound is strong against the Euro - was complaining about prices.