Update on Hotel Rate Predictions for 2015

This is going to be a painful year for hotel room rate increases. A few weeks ago I said

“The average daily rate for hotels increased over 4% each of the past three years. Freitag expects the increase in 2015 to be higher, about 5%. My projection is this will be a bit property-specific but I expect some to raise their rates 6% or more if they have had exceptional occupancy this year, more so if pre-bookings are high.”

Now according to this article, it looks like some cities are already on track to meet or exceed my predictions for 2015. From the article…

“Some cities will climb more than that. Room prices in San Francisco, Oakland, California, and Santa Cruz, California, will rise by up to 10 percent, Woodworth said. Denver is forecast to have a 9.1 percent average room rate increase, and Nashville, Tennessee, could see 8.6 percent.”

Nashville is not really a surprise. As I said in a post early last month, Nashville has moved into the Top 10 for business meeting destinations. Unfortunately this platitude affects leisure travelers to their city as well. Las Vegas is another city that continues to raise their room rates, something we have seen over the past few years as the number of travelers to the city continues to increase.

Speaking of leisure travelers, I also expect Orlando will raise their hotel room rates. They are coming off a record year of both rates and occupancy. Shingle CreekNevertheless, there is excess capacity so the greater increases will appear in their 4+ Star hotels, especially at peak times.

Latin America also is a hot spot geographically so expect increases in both rooms and airfares there. There will be periodic promotions so take advantage of them if your schedule permits.

Asia will be hit-or-miss depending on location. Singapore is still a hot destination and Hong Kong has been running at 90%+ occupancy. Thailand also has been strong but I don’t see substantial rate increases there. Other Asian locations also will have only nominal increases. This would be cities like Beijing, Shanghai, Tokyo, and Macau as long as you stay away from peak times.

One place where we will not see an increase – at least not substantially – is much of Europe. This is not because their rates are not increasing, rather it is because of the value of the dollar relative to the euro. For years, America has been a European playground because the value of their currency was much higher relative to our dollar. Well, that’s turned around. Now it is much more expensive for them to visit but a benefit for us traveling across the pond.

A potential wrinkle that may help constrain hotel room rate increases is Airbnb. There are some safety concerns from the business travel side but leisure travelers are generally pleased. Very simply, most travelers are getting more for less. For those who prefer to stay in hotels, seeing growth from services like Airbnb will help put pressure on room rates.

If you are able to control your travel, it is always less expensive at non-peak times. By adjusting your travel dates to a ‘shoulder’ time just before or after prime time can save you a lot of money on both airfares and hotel room rates.

 

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