Hotel Breakfasts

US, Europe, South America

My posts on recent speaking trips in Europe and South America included comments on hotel breakfasts (with pictures), so I decided to do a little online research on the subject. My conclusions, from that and my own experience:

In the US, low and mid-priced hotels usually provide a free breakfast; I am told that ones priced above $200 often do not. The breakfast at the low end is pretty minimal but the better ones, such as the Hampton Inns that are one of our standard choices when traveling, struck me as more than adequate — until I experienced the breakfast buffets of Europe and South America. The American ones usually include a waffle machine operated by the guest, a few kinds of dry cereal, oatmeal, bagel shaped rolls, a few varieties of obviously mass-produced pastries, bread, a toaster, apples, bananas, juice. Also scrambled eggs or machine made “omelets,” hard boiled eggs, bacon or sausage, tea and coffee.

The pastries in European and South American breakfast buffets were freshly baked, the bread recently out of an oven not a supermarket shelf. One of the Nero Wolfe novels contains a diatribe by Wolfe on the scrambled eggs served in the American household, followed by a demonstration by Wolfe, cook and epicure as well as detective, of how they should be made. I am not sure the scrambled eggs I was served in Krakow or Buenos Aires would meet Wolfe’s standards but they came a lot closer than anything I have had from a Hampton inn.

European hotel breakfasts—often included with your stay —tend to be more substantial, higher-quality, and less processed than US free breakfasts. While US buffets feature packaged muffins, waffles, and processed meats, European spreads typically highlight unwrapped local cheeses, artisan bread, cold cuts, fresh fruit, and espresso. (A well informed AI in Google’s employ)

My observations raise three questions:

1. Why do many hotels provide breakfast as an all-you can eat buffet instead of pricing items separately as restaurants usually do?

2. Why do many of them include breakfast in the price of the room instead of pricing it separately?

3. Why are the hotel breakfast buffets in Europe and South America so much better than those in the US?

The answer to the first question, like the answer to the more general question of all-you-can-eat buffets, hinges on the tradeoff between transaction costs and inefficiency costs, the latter depending in turn on the marginal cost of food. The advantage of the all-you-can-eat buffet is that it saves the cost of serving food to the customer and monitoring how much of what he eats. The disadvantage is that the customer may consume food past the point where its value to him is more than its cost to the restaurant, reducing the gain from the transaction, some of which goes to the restaurant as profit. A further disadvantage is that the restaurant is unable to distinguish the heavy eater from the light eater and charge him more for a meal of greater value to him and greater cost to the restaurant. The first problem is more of an issue the greater the cost to the restaurant of the food, more of an issue for steak or sushi than for salad or spaghetti.¹ The second is more of an issue the more customers vary in how much they eat. Breakfast buffets in US hotels mostly consist of food with inexpensive ingredients and for which labor inputs, converting bread to toast or batter to waffles, are largely provided by the customer. That helps explain US breakfast buffets but not the more luxurious buffets elsewhere.

I have come across an answer to the second question, do not know if it is true: Tax evasion. Meals paid for by an employer are taxable fringe benefits, since if he was not working he would still be eating. If he was not on a trip for his employer he would also still be sleeping but could sleep in his own bed at no additional cost, so a hotel room paid for by the employer does not count as a taxable fringe benefit. Include the breakfast in the price of the room and it is no longer taxable. I have been unable to find clear evidence of whether the explanation is true but it fits a general pattern: Anything odd on the market is either tax evasion or price discrimination. Price discrimination would work as an explanation if value to guest of room and value of breakfast anti-correlated but I do not see any reason why they would. I also do not know whether, if the explanation is true, it would be true under the different tax systems of Europe or South America.

I do not know the answer to my third question, but potential explanations of the quality difference exist for both the demand and supply side of the transaction. The obvious demand side explanation is that the less civilized Americans care less about the quality of what they eat. An alternative explanation is that the hard working Americans devote less time to breakfast than lazier and more self-indulgent travelers from other lands because the Americans have work to do or if tourists sights to see. One of the two explanations should be popular with almost everyone.

The supply side explanation is that most Americans can’t cook, which makes hiring the few who can expensive.

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1. Although Brazilian steakhouses in the US feature all-you-can eat meat and oriental buffets sometimes include sushi.