Let's Make the Recession More Painful

Geoff Smith Portrait

BY Geoff Smith

POSTED ON NOVEMBER 8, 2011

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EllisDon also owns a luxury resort in St. Lucia called Windjammer Landing. You should, of course, spend the entire recession there, but that’s not the point here.

These are tough times in the resort business, as you would guess. As soon as people start feeling financially insecure, they cancel their vacation.

(BTW, resorts tend to be the first business to come out of recessions as well: After about a year or so, when people realize they aren’t about to lose their jobs, and they have been stuck in their house for an eon of months, their spouses tend to say things like ‘Take me to the sun, or take me to a divorce lawyer’. But that’s not the point here.)

The point is this. We resort owners like to put ourselves into a death spiral. Our occupancies drop, so we cut prices. Tour operators (who are run mainly by the airlines) call us and say ‘Everyone else is cutting prices, you better cut yours or be left in the cold’. So, lamblike, we obey. Consumers aren’t stupid. They figure out pretty quickly that they can wait until the last minute, because the longer they wait, the lower the prices are. As they wait, the resort manager panics, and cuts prices further. Then the tour operators call all the other resorts, and beat them over the head to match the idiot who just cut his prices below cost. So they do, and the consumer – so incentivized – waits. We actually reward the consumer for harming us. And good for them I say – if we are going to be so stupid, we deserve our fate.

I have never seen such obviously illogical, self destructive behavior by business owners in my life, except maybe in the construction industry.

But of course, it’s not our fault. I blame the New York bankers.