Bahrain+hotel+industry+hoping+for+'grand+revival


 * Title of Article:** Bahrain hotel industry hoping for 'grand revival'
 * Source:** []
 * Date:** May 4th, 2011
 * Explanation:** Events that have transpired in the last few months have led to downward changes in demand due to changes in determinants of demand. Changes in tastes (fear of personal security in light of the protests held by the local people along with the government crackdown) and decrease of income (recession). However, hoteliers in Bahrain feel that the situation is about to change and demand will increase, and have such confidence that they plan on building a new hotel to increase supply and match the same price as before. Essentially, they're predicting that there will be a high increase in quantity demanded while maintaining the same price. Hotels in Bahrain are a relatively elastic good in terms of price elasticity of demand because of their unnecessity as well as the numerous other resort/vacation spots around the world acting as substitutes. This means that any upward increase in price will NOT increase total revenue, so the hotels will try and avoid this, as Graph 2 shows with more supply.
 * Vocabulary:**
 * Demand: Quantity of good or serve consumers are willing and able to purchase at a price in one time period.
 * Determinants of Demand: Factors that determine demand and lead to shift of demand curve.
 * Price elasticity of demand: Measures how much quantity demanded of a product changes with change in price of product.
 * Supply: Willingness and ability of producers to produce a quantity of a good or service at a price in one time period.
 * Substitutes: S eemingly equivalent items.
 * Break-even point: T he point at which cost or expenses and revenue are equal.

Graphs:

Explanation: I feel that as an economist, there have clearly been factors that led to the decline in demand of the hotel industry in Bahrain but the hoteliers may be hoping too much that the industry will improve when there is still unrest in the country and there are trying to predict something in a few months. The act of building a new hotel to increase supply when the current supply has not even reached full capacity seems like a very dangerous move to me and will result in a surplus. For every day that surplus exists, money needs to be paid for maintenance fees, employment wages, and since hotels typically take a few years to break even, this increase in supply will be a big risk that could worsen the industry.