The forecast for hotels in 2008 in the USA is a rise in rates (about 5% depending on location), along with a decline in occupancy (1- 4% depending on location).
As personal income sees limited growth in 2008, the projections for travelers staying in hotels decline. PKF Hospitality Research projects 115,000 rooms to be added to USA hotel room supply in 2008. The projected trend is for new hotel openings to decline from 2010 to 2012.
The interesting news to me as a loyalty traveler is the room rate increase estimated at 4.7% for 2008 and nearly twice the 2.7% estimated rate of inflation for 2008 and more than 1% over the long-term annual room rate increases.
Do I have this sorted out correctly?
The hotel industry is about to see a glut in hotel rooms as more than 100,000 rooms are added to US inventory in 2008. There is an anticipated decline in occupancy overall due to the extra hotel rooms hitting the market, and room rates are expected to rise at twice the rate of inflation in 2008.
“After analyzing historic periods of economic recession and rising inflation, PKF-HR found that hotel managers have been able to pass along inflationary increases to their guests,” – Mark Woodworth, President of PKF Hospitality Research.
“PKF-HR forecasts that a 5.8 percent increase in average daily room rates will offset a 3.8 percent decline in occupancy within the Luxury segment.”
Where is the logic in these trends? It certainly isn’t consumer-friendly logic.
Which brings me to the point of timing is everything when looking for a hotel bargain. I like to use San Francisco as a case study example due to the large tourism segment for leisure travelers and conference attendees.
Last week the American Academy of Orthopedic Surgeons was in the city and the doctors were easily identifiable by the AAOS lanyard hanging around the suit collar. 30,000 conventioneers in town and hotel prices through the roof. Starwood’s Le Meridien San Francisco was one of the few hotels in their portfolio still available at the end of the week — for $500+ night. This is for a hotel that was going for $129 for a couple of weeks back in December 2007.
Travel planning on a budget requires coordinating flight plans with hotel plans. I scored a great summer airfare to Iceland a few years back. I paid under $100 all-in roundtrip and I was loving life at the great deal I purchased only to suffer sticker shock at the cost of hotels in Reykjavik when $200/night looked like the norm.
And this leads me back to my last blog entry about St. Regis hotels appearing on SkyAuction.com. The bright spot for travelers being squeezed by inflation from all sides is the trend towards shifting hotel inventory back to the auction and prepaid sites like Hotwire, Priceline, SkyAuction, and LuxuryLink.
The hotels can sit half-empty or some inventory can be moved through the prepaid channels. This can mean some incredible deals for the watchful traveler.
This loyalty traveler has no qualms in passing on the points and upgrade if a room can be purchased for $200/night less than otherwise available.
I do have another suggestion for hotel loyalty programs to appease customers who may jump ship in the face of escalating prices and tightening travel budgets.
InterContinental Hotels Group PointBreaks are an incredible deal for a room at the rate of 5,000 points per night. The available properties change frequently and limited room inventory is available for these great loyalty program awards using hotel points.
Starwood expanded their Cash & Points award offers to cover most hotels around the world.
The two offers above are limited and controlled by the hotel and loyalty program, but when a traveler is able to get one of these deals using hotel points the savings can often be more than $100/night.
Hilton and Marriott can expand their PointStretcher and PointSaver opportunities to cover more hotels.
Hilton’s PointStretcher program has been weak due to limited hotel participation and limited dates for PointStretcher awards for several years now.
Hyatt can continue to offer some of the best loyalty program promotions available and they might not need to introduce reduced award offers, but I would like to see something from that chain to offer reduced cost awards using hotel points for rooms.
The hotel loyalty programs could be key to keeping hotel occupancy from suffering a more severe decline as prices continue to outpace inflation (unless the industry escalates inventory turned over to third-party online travel agencies like Priceline and SkyAuction).
Buy gas for work or buy gas for vacation? Pay for a hotel room or pay the mortgage?
The consumer is being squeezed from all sides in this economy and if the hotel industry continues to squeeze us for more profits, the money just might dry up.