Over 500,000 people visited Farnam Street last month to expand their knowledge and improve their thinking. Work smarter, not harder with our free weekly newsletter that's full of time-tested knowledge you can add to your mental toolbox.

Why can hotels get away with such exorbitant fees?

mental accounting

Jonah Lehrer explains the concept of mental accounting:

I’m writing this blog post because I just paid $16.95 for hotel internet access. Normally, I get around the hotel internet conundrum by walking to the nearest Starbucks and drinking a cup of coffee while sending my email. Alas, I seem to be in the last zipcode in America without a Starbucks. And that’s why I ended up paying a ridiculous amount of money to get online.
And it’s not just the internet. If I decided to eat breakfast in my hotel room, I’d pay $8 for a pot of tea. Eggs with bacon and toast would set me back $22. Smoked salmon hash? $28. A bowl of Cheerios? $12, plus tax, tip, and a $4 room delivery charge.

Economists call this sleight of mind “mental accounting,” since people tend to think about the world in terms of specific accounts, such as scoops of candy. While these accounts help us think a little faster – it’s easier to count scoops than tiny little M&M’s – they also distort our decisions.


Needless to say, mental accounting also explains my expensive internet connection. In the end, expensive hotels are able to charge insane amounts of money for Cheerios and wifi because these exorbitant charges get posted to the mental account of the hotel bill, which will be hundreds of dollars anyways. As a result, the charges don’t seem quite so crazy. (This also helps explain why cheap hotels are so much more likely to offer free internet and breakfast buffets. Sometimes, we get more when we pay less.)


I think there is more at play than mental accounting. In light of an expensive room, it's fairly easy to rationalize a “cheap” (in comparison) pot of tea. If you liked this post, you may also be interested in learning about How Williams and Sonoma Sold More Bread Machines

Jonah Lehrer is the author of How We Decide and Proust Was a Neuroscientist

Shop at Amazon.com and support Farnam Street