Does price gouging happen in the lodging industry? Case of Hurricane Florence

Abstract

This study examined price gouging in the lodging industry using the case of Hurricane Florence made landfall in North Carolina. Performance percentage differences were used to determine whether hotels charge exceptionally high room rates in the wake of an emergency. The study supported the notion of price gouging in the lodging industry in the name of the application of revenue management even though price gauging is illegal and prohibited. Extreme increases in room rates were apparent in Wilmington where the Hurricane Florence made landfall and nearby areas in a response to a higher demand, thus resulting a higher revenue. In addition, the closer to Wilmington the hurricane made landfall, higher price increases were detected. The moderating effect of the month on the relationship between distance from landfall and ADR changes was also observed. However, the term of price gouging is often associated with exploitation, so hoteliers should be mindful whether unpredicted additional revenue generated after the hurricane is enough to offset criticism price gouging receive, especially in its legal terms and ethical considerations.