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Copyright material -- for your individual educational use only A few questions follow the article below. Notre Dame Football Introduces Its Fans To Inflationary Spiral Wall Street Journal -- September 7, 2006; Page A1 SOUTH BEND, Ind. -- For years, Anthony Gallis, of Dallas, Pa., has rented a house here for $1,200 a weekend to stay in when he takes his wife and four children to see Notre Dame football games. But for this year's home-opener Saturday against rival Penn State, his usual house had been rented for months, by somebody else. Another house suggested to him, at $3,000, has also been taken. Mr. Gallis ended up reserving a suite at a Hampton Inn and Suites in South Bend, which normally goes for $129 a night, for $400 a night, with a three-night minimum. "It's just insane," says the 42-year-old owner of a State Farm Insurance agency back in Pennsylvania. At Notre Dame, where the college-football tradition of Knute Rockne, the Four Horsemen and the Gipper has a mythic aura, alumni and fans have long filled the stadium and packed hotels within 50 miles on Saturday game days. But the frenzy for home games this year is extreme even by Notre Dame's manic standards. Ticket requests for home games hit unprecedented levels. Prices online for everything from pregame parties to game tickets and rental houses have soared: A mere parking pass for the Penn State game recently sold on eBay for $500. Another eBay buyer spent $3,200 for two $59 tickets to the same game. To cater to well-heeled Notre Dame alumni, the regional airport has added parking space for up to 100 more private jets. Even the price of prime rib at Tippecanoe Place, a local steak and seafood restaurant, will rise a couple of dollars on the busiest Notre Dame weekends. "We only raise our prices a dollar or two," says General Manager David Barry. "The hotels went for the throat." Indeed, rates for many of the 4,015 hotel rooms in the South Bend area are skyrocketing. Two weeks before the start of the season, the Comfort Suites here was asking $245 a night, with a two-night minimum, for the Penn State weekend. That's up from $109 a night on non-football weekends. For the Sept. 16 game against the University of Michigan, the South Bend Marriott is charging $649 a night for a double room. That's more than the price of a room at the Waldorf-Astoria Hotel in New York. The Marriott's regular weekend price is $149 a night. The craziness is fueled in part by hotel, home and ticket owners using the Internet to reach the highest possible bidders for scarce resources. It is also propelled by championship-starved Notre Dame fans driven into a speculative frenzy by media and Internet hype about a season billed as a "return to glory." Expectations began soaring last year when new coach Charlie Weis reversed a decade of mainly mediocre seasons with a 9-3 record. This season, returning quarterback Brady Quinn, a contender for the Heisman Trophy awarded annually to college football's best player, leads a team ranked second in the country behind Ohio State University in the Associated Press preseason poll of sports writers. (After last weekend's lackluster 14-10 win against Georgia Tech, the ranking dropped to No. 4.) Each year, the school conducts a lottery to parcel out the 30,000 seats available to contributors, former athletes and parents in the 80,000-seat stadium. Saturday's game against Penn State fetched 66,670 ticket requests, topping the previous record of 59,368 requests for a game against West Virginia University in 2001. Three other home games this season rank among the 10 most-requested Notre Dame tickets ever, according to Josh Berlo, director of ticket operations in the athletics department. Once all the tickets were allocated for the season, the university refunded $11.7 million in deposits, more than twice last year's refund of $5.2 million. A university spokesman says Notre Dame "is pleased to be an economic engine" for the area but would not judge whether businesses are behaving fairly. Marriott defends its pricing, saying it's one of the top hotels in the area and this is a high-demand period. "Our hotel, and the other hotels in the market, have set their rates according to that demand," says a spokesman in an email. A spokesman for Choice Hotels International Inc., the franchiser of Comfort Suites, says rates are set by the individual hotels and are "dictated by what the market will bear." Hampton and other hotel chains make the same point about demand-based pricing. Notre Dame, an independent, Catholic university with more than 11,000 undergraduate and graduate students, was founded in 1842 by a priest of the Congregation of the Holy Cross. A priest in the congregation still serves as its president today. On a campus where a mural of Jesus overlooks the stadium and about 10% of students spend a year after graduation working with the poor, business owners' efforts to cash in on high demand causes some consternation. "It is an act of moral abdication" for businesses to pretend they have no choice but to charge as much as they can based on supply and demand, says Joe Holt, a former Jesuit priest who teaches ethics in Notre Dame's executive MBA program. Mr. Holt intends to use the hotel rates as a case study this fall for a class on business and values integration. "It is the economic version of 'The devil made me do it,' " he says. Still, he's wrestling with the dilemma himself. Last year, he rented out his South Bend home to two couples for a total of $1,000 during a home-game weekend (he spent the weekend at his other home in Chicago). This year, three couples offered him $1,500 to $1,800 to share the house for the Penn State game. He ended up asking $1,500. He says he bought a new mattress and linens for an empty third bedroom so he could accommodate all three couples. He jokes he'll even put mints on the pillows. During Notre Dame's last championship season, in 1988, hotel prices were lower, even allowing for inflation. Bernie Kish, former executive director of the College Football Hall of Fame in South Bend and a current professor at the University of Kansas in Lawrence, says the Marriott in South Bend that season was charging $125 a night on the weekend he saw the game against Stanford. That's about $214 in today's dollars. With hotel rooms in short supply, Jim Crandall isn't taking any chances. He plunked down $280,000 to buy two rooms in a new condo-hotel near campus. "I'm so ramped up, I can barely contain myself," says Mr. Crandall, a 41-year-old bond salesman at a Wall Street investment bank who lives in Essex Fells, N.J. His wife will use the rooms about half a dozen times while serving on a Native American alumni committee at the school. He and his family will stay in them to see four home games this year. "I'll never have to worry again about having a place to stay for a football game," he says. Mike Brenan, the developer of the condo-hotel, is benefiting from the team's surge. He has already sold 126 of the 200 rooms in his new Waterford Estates Lodge -- a renovated former Ramada Inn. The rooms initially were priced at $90,000 to $130,000 for a 16-foot by 24-foot space equipped with two double beds, a flat-screen television and a bathroom with granite countertops. Other college towns cash in on sports fever, too. At a Marriott near Auburn, Ala., home of Auburn University, a room for a Sept. 16 game is $203, compared with $129 the previous weekend. In Norman, Okla., home of the University of Oklahoma, the Holiday Inn is charging $159 a night on big-game weekends versus $95 on weekends when the team is out of town. At South Bend's tiny airport, the surge of interest in the team created a parking nightmare for private aircraft. Last year, for the home game against the University of Southern California, 270 private jets landed by kickoff, shattering the previous record of 172. That overwhelmed the parking area maintained by Corporate Wings, an on-site service and refueling company. The company was forced to station dozens of planes side-by-side on one of the runways. After the game, John Schalliol, the airport's executive director, and other employees spent six hours ferrying passengers from the terminal to their planes in vans, navigating between jets zooming to lift off. "What a bad day that was for me. Ugh," he says. To keep that from happening again, Mr. Schalliol this summer had a seven-acre, $750,000 parking lot constructed just for private jets. He finished the project in time for the first home game. QUESTIONS: 1. How does the wealth of Notre Dame football fans affect the demand for Notre Dame tickets? 2. Is the supply of South Bend hotel rooms price inelastic? Is the supply of rooms for rent (i.e., people renting their homes to football fans) price inelastic? 3. An excerpt from the article reads, “Last year, he [Joe Holt] rented out his South Bend home to two couples for a total of $1,000 during a home-game weekend (he spent the weekend at his other home in Chicago). This year, three couples offered him $1,500 to $1,800 to share the house for the Penn State game. He ended up asking $1,500. He says he bought a new mattress and linens for an empty third bedroom so he could accommodate all three couples. He jokes he'll even put mints on the pillows.” Which concept from our material in chapter 4 explain how someone who lives in a house would actually offer it for rent and stay some place else? Explain. 4. When the demand for Notre Dame tickets is great, consider two options that the University can use to allocate tickets: (1) conduct a lottery to parcel out the 30,000 seats available to contributors, former athletes and parents in the 80,000-seat stadium; or (2) raise ticket prices until the market clears. Why does Notre Dame choose to hold a lottery?
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