Compared to what’s happening with the cost of rental cars and hotels, the 8.1 per cent inflation rate in June is a bargain.
The term greedflation has been used for price increases that seem to go above and beyond the inflation rate. If you’ve done any travel planning this summer, you know all about greedflation. A reader who rented a Hyundai Elantra for one day recently in Victoria was shocked to be charged $155.12, including tax and excluding the cost of the collision-damage waiver. He went through his records and found he paid between $31.20 and $57.30 for one-day rentals from January 2019 through June 2021.
This same individual booked a room at a mid-range hotel in Vancouver earlier this month for a single night and was charged $591.90, all in. He said that’s 50 per cent more than he paid before the pandemic.
And then there’s the enquiry he made about a room for August at an another Vancouver hotel, this one where he has a corporate rate. An e-mail from the hotel said the corporate rate would not be available, but a 20 per cent discount off “the best available public rates” would be offered. The cost for a deluxe king room: $598.40 a night. This reader passed.
A recent newsletter looked at shrinkflation, where companies manage inflation by shrinking the size of their packaging without a price cut. Greedlflation is about how businesses are dealing not only with inflation, but also the loss of business in the pandemic. Hotels and rental car companies were particularly hard hit by economic lockdowns that reduced travel to minimal levels.
Supply and demand dynamics also play a role here. People are on the move in summer 2022 and they need hotel rooms and rental cars. Prices wouldn’t be so high if there wasn’t demand to support them.
There’s a short-sightedness to greedflationary pricing, though. The economy will slow down as a result of the Bank of Canada’s use of rising interest rates to cool inflation, and speculation about a possible recession is growing. By next year, people could be spending less on travel and feeling choosier about who they deal with when they do need a hotel room or rental car. Companies with a particularly high price today may be off the list.
Rob’s personal finance reading list
Behind the Facebook façade
All about the money mirages people create on social media about their ability to afford the good life. A good antidote if you’re feeling FOMO – fear of missing out.
Real estate investing is mainstream
A look at the percentage of people in Ontario, B.C. and Atlantic Canada who own more than one home. Investor demand helped create the price spike that rising interest rates are unwinding.
Monarchs, prime ministers and poets
A look at whose faces are on money in countries around the world.
Better advice for seniors
This article for advisers lists ways they can provide better service for this country’s aging population. I’m including it here to give seniors some context for assessing whether they’re getting the service they need from their advisers and financial planners.
Ask Rob:
Q: Can you please share the best downloadable excel spreadsheets for Canadian retirement planning please?
A: I did a quick Google search and found only some U.S. retirement planning spreadsheets available for download. If anyone knows of one that works well, tell me about it so I can share with readers – rcarrick@globeandmail.com. Meantime, here are a few online retirement calculators that are worth a look.
Do you have a question for Rob? Send it by email.
Today’s financial tool
Cryptocurrency basics from a reliable source, the Ontario Securities Commission.
The Money-Free Zone
Time’s list of the world’s greatest places to visit includes Toronto and Tofino, B.C. Lots to research here while you wait for the 2022 travel boom and airport dysfunction to fade.
Watch this
A TickTok video in which a career counsellor pushes back on employers who say, “nobody wants to work any more.” Right on.
What I’ve been writing about
- Why GIC rates didn’t pop after the big jump in the BoC’s overnight rate, and why returns could actually fall
- Lessons on inflation and rates from the 21.25% mortgages and 19.5% Canada Savings Bonds of 1981
- The housing market trend no one’s talking about is improving affordability for young buyers
Rob Carrick