Travel in 2015 will be Even More Expensive

I said before that I believe airfares will rise again next year, not as much as we have seen over the last few years but another increase nevertheless. For a look at lodging, I always go to the industry’s best database, STR. One of the best forecasters is Jan Freitag, Senior VP at STR. He offered up his top 10 predictions for 2015 and yes, they include higher hotel costs.

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.

There is comparatively little in the way of new hotel development which means there is very much demand chasing too little supply. Freitag points out a couple reasons for this. First, new hotels are competing for materials against other construction like housing and commercial buildings. As the supply of materials begins to thin, costs will increase for what’s left. In addition, there are a limited number of skilled workers so again, hotels have to compete with others so wages will be an important factor.

This affects leisure travelers as well as business travelers but it also makes groups and meetings much more expensive next year as demand is soaring. With meeting planners scheduling events months in advance, hoteliers have an early idea what to expect for occupancy next year and from the hotel point of view, demand looks very strong.

Freitag also mentions Airbnb and Alitrip. Both of these should show growth in 2015 but for different reasons. Airbnb will grow because of limited hotel supply, interest in features not available in hotel rooms, and better in-town locations that also happen to be less expensive. Alitrip is the new online travel source from Alibaba, the Chinese firm that recently set a Wall Street record for initial valuation. This travel startup arguably has the inside track to be the primary source for Asian travel. Coincidentally, this is also where travel is expected to increase the greatest next year.

One thing Freitag doesn’t talk about is hotel brand loyalty. In this us vs them world, we as travelers are most concerned about rising occupancy costs. On the other hand, hoteliers are most interested in earning as much as they can. It is an awkward relationship for sure but please remember, don’t take any of this personally.

Yes, some hotel chains have raised the number of points to receive a free room just as some airlines have raised the number of miles for an award ticket. And yes, some have also reduced the benefits to their elite hotel guests just as the airlines have. The only way to fight back against this is with your wallets. Find the best deals you can in 2015 even if it means searching for another brand – or maybe no brand loyalty at all. This is all about what works best for you next year in a more expensive travel year.