More years ago than I care to remember, I took a college course titled “Hustlers, Beats and Others.” Taught by Ned Polsky, the course was described as an exploration of “deviant branches of American life.” Chief among them, as I recall, was the subculture of pool hustlers, for whom Polsky evinced a great fondness.
But the fact I remember most clearly from that semester was the news that loan sharks charged 20% interest. A week!
Twenty percent interest rates are now commonplace, if on an annual rather than weekly basis, but even that seems to me only slightly less outrageous than the mob’s cut. In a world in which inflation is less than 3% and wages grow annually by about the same amount, isn’t 20% to 24%—the range of most credit card interest rates—too high? And what do we mean by “too high”? Can something be too costly if someone is willing to pay its price? What’s the difference between maximizing profit and price-gouging? Why does North Carolina have a usury limit of 8%, but the usury limit in Arizona and Rhode Island is 36%?
Too much? Too many obscure questions? Blame Wendy’s. And bear with me: this post eventually will get around to campgrounds and RV parks.
It’s been nearly a month since the fast-food hamburger chain’s CEO, Kirk Tanner, kicked up a shit-storm of consternation among his customers by telling industry analysts that Wendy’s would start experimenting with dynamic pricing in 2025. There was a lot more, having to do with digital menu boards and generative AI and “suggestive selling”—a phrase that itself is rather suggestive—and Tanner never used the words “surge pricing.” But “surge pricing” is pretty much how the hamburger-eating public got the story, and quite quickly, and the resulting kerfuffle continues to this day.
Amid a widespread backlash that included calls for boycotting the chain, Wendy’s tried to walk back Tanner’s comments by declaring it has no plans to raise prices “when our customers are visiting us most,” a curious qualification. Any pricing changes it might implement “would be designed to benefit our customers.” Digital menu boards, for example, will “allow us to change the menu offerings at different times of the day and offer discounts and value offers to our customers more easily.”
See what they did there? Dynamic pricing simply gives Wendy’s the opportunity to lower prices, not to raise them. Dynamic pricing is a good thing for consumers.
Let’s call this out for the BS it really is. Number one, the comments that triggered all the fuss are part of a blizzard of adjacent phrases—surge pricing, demand pricing, dynamic pricing, competitor pricing, supply and demand, real-time market data, pricing algorithms, price fixing, price gouging—that revolve around one fundamental purpose: to increase profits by charging whatever the market will bear. Some of that might be legal, some of it may not be. What’s legal today may be illegal tomorrow and vice versa, or be legal in one state but not in another. But throughout, the game is all about revenue “enhancement.”
Number two, Tanner’s comments were made not in a newspaper or TV interview but on an earnings call, whose primary purpose is to provide analysts with the information they need to predict how well a company will perform financially. That information, in other words, tends to stress what the company will be doing to increase profits, not lower them. (Not that CEOs are allowed to lie, or fail to disclose adverse information.) The initiatives CEOs will describe are meant to fatten the bottom line, by raising prices or lowering costs or increasing efficiencies.
But the biggest sleight-of-hand has to do with Wendy’s protestations that it will use dynamic pricing only to lower prices, not to raise them—which, aside from whether that declaration can be trusted, raises the question: lower them from what? And to answer that, we can turn from the food and beverage industry to its sister industry, the hospitality business, which pioneered this kind of deception.
Go to any hotel or motel and look at the card that’s usually mounted on the back of your room door, and you’ll see what’s called the “rack rate.” Unless you’ve had the bad luck of booking a room in the path of the solar eclipse (for example), you’ll see an impossibly high rate that you’d never dream of paying and may congratulate yourself on getting a “deal.” Of course, nearly everyone else in the building also got a deal, which is just another way of saying you didn’t get stiffed. The only true value of the rack rate to you as a customer is that it establishes the maximum you might be charged, but it certainly doesn’t help you understand what a “fair” rate might be, or what that same room may cost next week or next month.
“Rack rate” got its terminology from the hotel rate cards that were kept in a metal rack at the front desk. The campgrounds and RV parks version of such cards used to be printed sheets that spelled out site rates, but those increasingly have become just a memory—no posted rack rates for campers! That absence, however, hasn’t kept the industry from embracing dynamic pricing with a salivating eagerness, propelled by the promise that doing so will yield higher profits—which it has, and with remarkably little pushback from the camping public. Wendy’s customers and RVers, it seems, must occupy non-intersecting portions of the Venn diagram of consumerism.
(Campgrounds and RV parks, it should be noted, also have their own version of “let’s give you a deal” by offering so many discounts—AAA, senior citizen, KOA, Good Sam, first-responder, active military, retired military and on and on—that anyone who can’t get at least 10% off his or her site rate could be sold a bridge in Brooklyn.)
The common denominator of all these pricing schemes, however, is their lack of transparency to the average consumer. Indeed, the more that pricing and payments are computerized and driven by algorithms, the less a customer can understand his or her options and the more of an upper hand is gained by businesses over their customers—customers who repeatedly are assured that they’re the winners, regardless of the asymmetrical relationship in which they’re engaged. Indeed, industry “thought leaders” urge all kinds of businesses to hammer the “good news.”
Take, for example, a recent analysis of Wendy’s missteps by Sherri Kimes, an emeritus professor at the Hotel School at Cornell. “Always frame things as a gain for customers,” she wrote in QSR Magazine, a food industry publication. “Rather than saying that you’re going to charge more at certain times, talk about the discounts or special promotions that customers can get. . . . Make sure customers are aware of when they can get better prices. No surprises here! . . . Keeping them in the loop maintains trust and keeps them happy.”
Maintain trust, indeed. The Hotel School at Cornell, it should be pointed out, is cranking out a steady stream of Kimes acolytes to further shape the hospitality industry—inside and outside, hotels and campgrounds alike. Today’s hustlers may not break your kneecaps if you don’t pay up, but they have something far more effective than a baseball bat: college educations and computerized pricing and a shameless willingness to convince you how lucky you are to be doing business with them.
And just wait until they start harnessing the power of AI. . . . .
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