Fares and fees

David Lazarus’ column in the SF Chronicle this morning riffs on airlines’ recent decisions to sell services that used to be included in a ticket price for ‘extra’ charges. The implication is that passengers are somehow being chiseled, but I’m not sure this is the right way to look at it. One could easily say they were no longer charging people who don’t use things: Spirit Air, for example, charges to check a bag, which means they don’t charge people who don’t check bags, unlike most airlines who charge everyone whether they do or not. I think this is fine, assuming competition is keeping the various prices close to cost.

What’s not so fine is that things like airplane tickets and hotel rooms are bought on the basis of a base charge quoted without really making it clear what other charges (like local taxes) will apply or what services are extra, like high-speed internet. Hotels have, it seems to me, a self-defeating habit of charging completely ridiculous prices for things like minibar items and telephone calls and tacking on add-ons that surprise me. I’m sure it’s all legal, but the net effect is to make me suspicious and resentful of any hotel, fearful that they’re trying to chisel me rather than offer a good service at a fair price. Lazarus’ choice to see air travel price disarticulation as anti-customer is further evidence that this behavior may bear a big reputational price.

I don’t know anyone who will even open a minibar or make a call from a hotel phone now that we all have cell phones, so I can’t imagine that hotels are charging the right prices for these things. They also seem to be deaf and blind about what business travelers really want. I don’t need three kinds of soap, and I don’t need a mint on my pillow, or seven pillows. What I could really use, me and everyone who goes in a hotel room, is a desk 27″ high with no lap drawer that I can type on on my laptop, and a reasonable chair; fat chance.

Nor am I confident in airlines’ judgment about anything: this is an industry that has not made a penny of net profit worldwide since the Wright Brothers. What is it about aviation that cripples the judgment of its executives? I almost always get in the plane and arrive where I’m going, but everything else about dealing with them is on a steady decline. Their outsourced call-in centers and now, email response units, are a radiant example of how, though quality-seeking usually brings cost savings, cost-cutting usually dings quality. Someone in some business school has told these people that if agents call people sir and mouth really cloying apologies, they don’t have to listen to what they say or actually read their mail (takes too long; faster to guess) or solve the customer’s problem. That person is wrong, and being groveled at by people who are not actually doing the small thing you need may be the worst combination of affect and practice known to man.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.