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Hotel Rates on the Rise

Bad news for business travelers: hotels are getting more expensive. Room demand far outpaced supply in the period from February 2014 to February 2015, and the result was a year-over-year increase of nearly 5% in the average daily room rate (ADR), according to numbers from hospitailty research firm STR.

The ADR of $115 for February 2015 is the highest observed at any time in the past year, though still below the peak reached in 2007. This is the latest study to suggest that accommodation costs are on their way up. Last month released its annual Hotel Price Index, which found that North American hotel rates rose for a fifth consecutive year in 2014, and are now within 1% of pre-recession highs.

U.S. Hotel Costs, February 2014 – February 2015


Source: STR, via Skift

Here are some more findings from STR, as reported in Skift travel news.

  • The increase in demand for hotel rooms (4.6%) was over five times the increase in supply (.9%). Hotels benefited from these market conditions: revenue per available room, an industry measure of financial performance adjusted for capacity, was up a whopping 8.5%.
  • Not all geographic markets saw hotel costs increase last year. In New York City, which had the most rooms under construction in 2014, rates actually fell by 1.7%.
  • On the other end of the spectrum, Miami saw the largest rise in average daily rates, at 9.1%.
  • Price increases were especially dramatic at the top, with luxury hotel rates up 5.5%.

What to Expect in 2015

STR projected that prices would rise even more in 2015. Average daily rates are expected to increase 5.2%. Though more hotels are under construction this year than last, it’s still not enough to keep up with continued growth in demand.

U.S. Hotel Cost Projections, 2015 – 2016


A Bit of Good News?

Several trends within the hospitality industry could exert downward pressure on hotel rates. As of February, some 436,000 hotel rooms are under contract to be constructed, an 18% increase from this time last year. And the rapid adoption of home-sharing services like Airbnb by leisure and business traveler alike means that hotels are no longer the only lodging option on the road.

This is borne out by the experience of Rocketrip customers, who see some of their most significant savings by finding more affordable accomodation options than paying for a hotel, such as using Airbnb or staying with a friend.

Interested in learning more about how to counter the high costs of business travel? Check out Rocketrip’s report on the 5 Signs Your Company Is Spending Too Much on Business Travel.

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