Venice is a stange and wonderful place - full of quirks and idiosyncracies, and while often (but not always - go when it's freezing!) filled with tourists, it does what it can for its own, and its regulars. Apparently there are three prices - Tourist, Italian, and Venetian. If you're a regular face in a restaurant or cafe, you'll notice prices dropping significantly over time (depending on how long you stay!) - one night I was out to dinner with one of my friends, and supper was free!
Still, people complain about high prices in Venice, even the Venetians. I think the British are lucky on any trip, because there is no way you'll pay coffee and sandwich prices that we do over here! Just have a 'toast' (ham and cheese toasted sandwich) and a coffee and you'll pay 3 Euro depending on where you go. Even my Milanese friend couldn't believe prices in DuChamp on Camp Santa Margerita ("But how is it possible? I don't understand. HOW is it possible?") So, don't always believe the myths.
Also, hotels often decrease prices significantly in low season, and while often freezing, it is worth it for a deserted San Marco, and a real look at Venice.
...same for the gondola - the price will plummet from 120 to 50 if you are prepared to walk-away. Always go to the bigger jetty's where there is more competiton for your business..
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