I’m sitting here in my room in the Mandalay Bay, getting ready to shower and get dressed and go out for the night. I am a bit parched. I usually don’t even bother glancing at the mini bar, but the tap water here isn’t very good, and I was eyeing the bottle of Fiji water sitting there. Then I looked at the price list… $8 for a smallish bottle.
I know that the obvious answer is, “well, they mark it up that much because people pay it. And a lot of people are on business expense accounts, so they don’t care.”. But, wouldn’t it make sense to mark the items up SOMEWHAT, so more people buy them? If the bottle of water had been, say, $4, I just might have grabbed it. That’s still a pretty hefty markup for an item that usually goes for around $2, and profit for the hotel. But at that price, I wouldn’t even think about it. Likewise with the small bag of $13 cashews. I know I’m not alone on that.
I know outrageous mini bar prices are kind of a given a bit of a joke to most people, but really, wouldn’t it make sense for the properties to go with a smaller, but still sizable markup, rather than an absolutely outrageous one, and get more volume?
Or am I underestimating the amount of people who will pay $11 for a small bag of snack mix?
Well, it depends on the profit per bottle, doesn’t it? If it costs them a dollar to put the bottle there, and they sell X bottles at $4 and Y bottles at $8 it’s pretty easy to figure out which price they’d prefer to sell at.
It’s Vegas baby!
People are on vacation and splurging…not to mention drinking and picking these drinks up without a second thought of the price.
At least not until they get their bill at checkout.
Well, I get your point, but my point is, I’m just gonna walk out to the Walgreens up the street and grab a few bottles. So they get nothing. They’ve lost a sale.
I have no doubt that the industry number crunchers know lots I don’t, and the loss of my (and people like me) money isn’t enough to make them change. I’m just trying to understand the logic behind it. I just find it hard to believe they wouldn’t make up the loss of the higher price with the volume of a more reasonable (but still more than a regular store) price.
Makes total sense, but I guess that was sort of an unstated part of my question… DO they ever sell bottles at $4 to know that they’ll sell X of them on average? Mini bars have always been known for their absolute outrageous markups. I guess if, like you say, they know projected sales for various prices and feel comfortable at the higher price, that totally makes sense, it’s just that they always seem to be at the high end of outrageous.
Of course, I’m only in hotels from time to time, so it’s not like I keep tabs on the prices.
Why? Because they can charge whatever they want knowing that some percentage of their guests will greatly overpay for a diet coke and candy bar. When you’re on the 64th floor of a hotel what other options do you have besides room service and your mini bar?
You could always just find a 7-11 somewhere, but who is going to go to all that trouble?
And if you’re on a business trip it’s not like you’re paying for it…
It’s not like Costco. They are not trying to make a few more pennies of profit by driving volume. They have a channel that provides a huge profit margin with almost no marginal cost. If they sell a few bottles of water, or bags of chips, per day, it’s like free money. Maybe it’s not worth it to multiply the volume by 5 to make more revenue but the same $$ of profit.
**Tellyworth **is right–economists study this stuff, and entire books have been published on pricing theory. They know exactly what they’re doing.
But it’s not free money, the hotel I work for discontinued minibars 5 years ago. And we hadn’t actually made money on them in over a decade (ie. as far back as we could easily check the numbers).
The labour costs alone in tracking and stocking the bars ate up every penny of revenue and then some. We had 1 full-time staff member for ~150 rooms doing nothing but mini-bars plus a part-timer to cover weekends and holidays. And every month or so there was a bonanza of free candy and nuts for the staff as soon-to-expire stock was rotated out of the minibars.
Customer complaints plummeted after we got rid of the bars too. Check-in times dropped, no beer being replaced with water by previous guests, no arguments with guests over consumption, and I had half the credit card charge-backs to deal with. Best decision we ever made.
Since the minibar isn’t profitable anyway, and guests do get thirsty and hungry and get the munchies, why not set it up where it’s a flat fee to open the minibar, and if the guests open it, they can have everything in it. The fee would be no more than what it costs to stock it. I’m thinking the minibar would have 3-6 “compartments”, with some kind of tear open pull tab on them, with a label on it explaining what the fee is.
The fees would be somewhere between 10 and 30 dollars tops, based on the wholesale cost of the items plus a small fee to pay staff to restock it. It wouldn’t need an elaborate inventory check, the same maids who clean the room can just shove in new “modules” to replace the missing ones.
Side note - My Wife and I just spent 3 weeks in southern Germany. All the hotels we stayed at had a fridge with a selection of beers and pop. The prices were VERY reasonable.
They’re not selling to people willing to walk to Walgreens. They’re selling to people who just arrived, don’t know the area, and need a damn drink/snack now.