Inflation data shows hotel prices are skyrocketing, but you can still find deals

Hotel prices appear to be skyrocketing, but travel experts warn appearances can be deceptive.

The cost of out-of-home accommodation, including hotel and motel rooms, rose nearly 8% between May and June, according to the latest edition of the Consumer Price Index released this week by the Bureau of Labor Statistics. On an unadjusted annual basis, hotel rooms increased by almost 17%.

These numbers could be somewhat misleading, given that a year ago travel had virtually stopped due to the COVID-19 pandemic. Comparing the June 2021 CPI figures with those for June 2019 – arguably, a fairer comparison – shows that hotel prices are roughly stable from where they were before the pandemic.

As such, the CPI data didn’t boost hotel stocks much higher. Actions by major hotel operators including Marriott MAR,
-0.09%,
Hilton HLT,
+ 0.21%,
Hyatt H,
+ 0.79%
and InterContinental Hotels Group IHG,
-0.93%
fell about 2% at Tuesday’s close, although all have risen significantly since the start of the year.


“In past crises like 2008, there was no pricing discipline – everyone lowered their rates just to increase volume.”


– Seth Borko, senior research analyst at Skift, the travel industry’s point of sale

Other metrics show a similar trend, said Seth Borko, senior research analyst at Skift, the travel industry’s outlet. The hospitality industry focuses on average daily rates, or ADR, as a measure to assess price trends in the industry.

In May, the average daily rate in the US hospitality industry was $ 117.69, which was actually nearly 11% lower than May 2019 levels, according to data from the industry market data company. hotelier STR CSGP,
-2.18%.

“In past crises like 2008, there was no pricing discipline – everyone cut their tariffs just to increase volume,” Borko said. “This time people have stood their ground because they realized these crazy extenuating circumstances will hopefully pass.”

In other words: hoteliers are keeping their rates, or even going back to 2019 levels, rather than offering discounts to drive traffic to their properties.

Milwaukee vs. Miami

Not all destinations have struggled to bounce back from the pandemic. Data from travel advertising technology company Koddi shows that hotel demand has skyrocketed for a handful of destinations in particular, including resorts, beaches and other outdoor destinations. Anaheim, California, home to Disneyland, experienced the strongest demand growth of the year to date, with an increase of 790%.

This is less the case for smaller towns which typically do not cater to tourists or where business travelers make up a significant portion of bookings in a typical year.

“If you’re going to a business hotel in Milwaukee, you should probably expect a discount,” Borko said. “And if you go to a Florida beach, you should expect to pay extra.”


Anaheim, California, home to Disneyland, experienced the strongest demand growth of the year to date, with an increase of 790%.

That’s good news, potentially, for families wanting to travel across the country just to visit loved ones, but bad news for anyone hoping to relax on a long-awaited tropical getaway.

A recent report by the American Hotel and Lodging Association (AHLA) found that 21 of the country’s top 25 hotel markets are still in recession or depression, with revenue per room falling 70% from 2019 levels.

“There are still deals to be found in cities, which haven’t seen as much of a recovery in tourism,” said Jordan Staab, CEO of SmarterTravel.

The four markets that were the exceptions in the AHLA report were Phoenix, Virginia Beach, Tampa and Miami. In Miami in particular, hotel prices are now well above 2019 levels, with resorts earning 31% more per available room in May than two years ago.

The hospitality industry faces capacity constraints

One factor that explains why hotel costs can reach new heights in markets like Miami is that the hospitality industry is still struggling to get back to normal operations.

During the pandemic, many hotels have chosen to shut down the wings of their properties and lay off staff to deal with the travel slowdown. For example, hotels have chosen to continue cutting down on daily room cleaning even as the economy rebounds.

Resuming operations at full capacity does not happen overnight, which means demand can easily exceed supply.

“The offer can be a lot more dynamic in the airline industry because if you have a really hot route you can bring in planes that were flying over other routes,” Borko said. “They can reshuffle their offer.”

“But what if all of a sudden the demand for Miami is twice as high as it was a year ago?” Borko said it is much more difficult to increase the supply. As a result, prices are soaring.

This is where a company like Airbnb ABNB,
-0.22%
comes into play. Vacation rentals can absorb some of this excess demand, particularly if local residents choose to add their properties to the platform to earn extra cash.

In turn, Airbnb and other real estate rental platforms may work to offset some of the demand pressure that would normally drive up hotel rates.

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