Are high hotel rates a signal of the superiority of the services they offer?

See The Rise of the $1,000-a-Night Hotel Room: The number of pricey hotel rooms has soared as more wealthy travelers are fine with paying the eye-popping rates by Dawn Gilbertson of The WSJ:

"The number of U.S. hotels with an average daily rate of $1,000-plus in the first half of this year was 80, compared with 22 in 2019, according to new data from CoStar Group, a global real-estate analytics and data firm. In Europe, the number of places tripled, to 183. The increases far outpaced the opening of new hotels."

"Prices at luxury hotels of all stripes are dramatically higher than they were in 2019. Host Hotels & Resorts, which owns 76 hotels in the U.S. and just bought 1 Hotel Central Park in New York and the Ritz-Carlton Turtle Bay in Hawaii, told investors earlier this month that vacation demand is holding up at its resorts despite a 51% increase in rates since 2019.

Bjorn Hanson, adjunct professor at New York University’s Jonathan M. Tisch Center of Hospitality, says something else might be at play. Some luxury hotels are boosting rates to unheard of levels to send a signal about their superiority in this era of hotel service shortfalls.

“Rate has become a psychological proxy for the industry to say, ‘We’re in good condition. We have all the services,’” he says."

Here is what Wikipedia says about signalling it:

"In contract theory, signalling (or signaling; see spelling differences) is the idea that one party (termed the agent) credibly conveys some information about itself to another party (the principal). For example, in Michael Spence's job-market signalling model, (potential) employees send a signal about their ability level to the employer by acquiring education credentials. The informational value of the credential comes from the fact that the employer believes the credential is positively correlated with having greater ability and difficult for low ability employees to obtain. Thus the credential enables the employer to reliably distinguish low ability workers from high ability workers."

Related posts:

Why would men bring fake cell phones to bars? (2021)

Students: Make a mistake on purpose, its good for you! (2007)

Rent a White Guy: Confessions of a fake businessman from Beijing (2010) (by Mitch Moxley in The Atlantic Monthly, excerpts below)

Can adding a phantom third story to their homes help families find a wife for their son? (2018)

Why do employers pay extra money to people who study a bunch of subjects in college that they don’t actually need you to know? Signaling (2018)
 
Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) (2007)

How does a company selling used luxury goods spot fakes? (signalling and conspicuous consumption) (2019).

Why do stores sometimes pay people to be fake shoppers?  (2019)

In Poorer Countries, Obesity Can Signal Financial Security (2024)

Excerpts from "Rent a White Guy"

"Not long ago I was offered work as a quality-control expert with an American company in China I’d never heard of. No experience necessary—which was good, because I had none. I’d be paid $1,000 for a week, put up in a fancy hotel, and wined and dined in Dongying, an industrial city in Shandong province I’d also never heard of. The only requirements were a fair complexion and a suit.

“I call these things ‘White Guy in a Tie’ events,” a Canadian friend of a friend named Jake told me during the recruitment pitch he gave me in Beijing, where I live. “Basically, you put on a suit, shake some hands, and make some money. We’ll be in ‘quality control,’ but nobody’s gonna be doing any quality control. You in?”

I was.

And so I became a fake businessman in China, an often lucrative gig for underworked expatriates here. One friend, an American who works in film, was paid to represent a Canadian company and give a speech espousing a low-carbon future. Another was flown to Shanghai to act as a seasonal-gifts buyer. Recruiting fake businessmen is one way to create the image—particularly, the image of connection—that Chinese companies crave. My Chinese-language tutor, at first aghast about how much we were getting paid, put it this way: “Having foreigners in nice suits gives the company face.”

Six of us met at the Beijing airport, where Jake briefed us on the details. We were supposedly representing a California-based company that was building a facility in Dongying. Our responsibilities would include making daily trips to the construction site, attending a ribbon-cutting ceremony, and hobnobbing. During the ceremony, one of us would have to give a speech as the company’s director. That duty fell to my friend Ernie, who, in his late 30s, was the oldest of our group. His business cards had already been made."

"For the next few days, we sat in the office swatting flies and reading magazines, purportedly high-level employees of a U.S. company that, I later discovered, didn’t really exist."