We have all experienced it – a large sporting event in a major city and prices go through the roof. Take for example the World Cup held in 2010 in South Africa. A report in The Guardian (London) in February 2010 reported an investigation by South African tourism authorities into unreasonable inflation of hotel and transport prices in the run up to the 2010 World Cup. According to the piece, the average hotel room had increased by one-third in price, compared to normal rates. For their part, business leaders in the hospitality sector said the higher prices reflect higher demand. They argued that although the World Cup was scheduled during the South African winter (low season), it would be treated as the high season because of the hundreds of thousands of visitors expected. An official from FIFA’s official accommodation agency ‘Match’ is quoted as saying that any ‘profiteering’ was no worse than at any other World Cup. A report in a local newspaper, Mail and Guardian, also raised the issues of high accommodation and travel costs and reported local trade union leaders as requesting that the South African competition authority should investigate.

Questions 

1 Can you think of any valid reasons why a business might increase prices in the short-term, for example around the time of special events like the World Cup?

2 Will high pricing in the short-term affect longer-term business? Relate your answer to the text above.