Sunday, September 28, 2014

How the price of a Martini reveals the property value of a city

A Hendricks Gibson is basically a commodity (although the bartender does need to know what she is doing). But a good Gibson at the Starlight Lounge in LaCrosse, Wisconsin is $8; at the Roof Garden at the Peninsula Hotel in Beverly Hills is $16; at the King Cole Bar of the St. Regis Hotel in New York is $22. 
Let's say the cost of the cocktail, including labor, but exclusive of real estate, is $7. Then the implicit rent you are paying for sitting in a bar in LaCrosse is $1; in Beverly Hills on a rooftop is $9; and in NYC is $15. If one consults Zillow, one will find that this ratio of 1:9:15 for real estate in LaCrosse, BH and Manhattan is pretty close to the truth.
One key thing--all these drinks are served in competitive markets--there is true thickness in bars in these markets. And the people at the Roof Garden and the King Cole will let you sit a nurse your drink without hassling you about it.  So while having a drink in these lovely spots is very expensive, it is not a rip-off--one just has to pay the rent.
A drink at, say, Disney World, or FedEx field, doesn't count, because if you want to stay at the Park/Game and have a drink, you have to pay a monopoly price for a drink (in the case of the stadium of the Washington Football Team, you might even pay for a drink that is past its expiration date).
Needless to say, further research is necessary.

1 comment:

Anonymous said...

Did author get hassled in La Crosse?