Nov152014

Finding your hotel price point

A conversation about hotel rates with a teacher and looking at the average hotel spend for a full-time traveling couple like Drew and Carrie of TravelisFree.com and thinking about my own annual travel expenditures had me thinking about how to look at all this data in a table to determine travel budgeting.

One of the aspects of travel I study is the hotel price point for different travelers. Sitting in a Denver hotel the other night with the November chilling polar vortex spinning around my head, I started thinking about how each of us has a hotel price point, or a nightly price point for any kind of paid lodging like B&Bs, Airbnb, HomeAway house rentals. All types of lodging have a cost point. We don’t want to spend the next 12 months paying off the last 12 months of travel, so frequent travelers live with a sustainable travel budget.

Since lodging is generally the single largest expense of travel, setting a price point is essential. Frequent travelers usually want to cut the cost of lodging when you are looking at staying overnight for 25 nights and more per year. When you can spend $50 per night or $500 per night for travel accommodations, having a budget for hotels and lodging can mean a difference in scale of thousands of dollars per year between the accommodations budget for different travelers.

Annual Hotel Spend table

My first crude table shows the cost of lodging by average hotel rate and number of hotel nights each year. I consider low hotel rates to be $80 to $100 per night after tax. This is your typical Holiday Inn Express, Hampton Inn, Hyatt Place and Marriott Fairfield Inn. This means a room rate around $68 to $90 per night before tax. My average hotel rate tends to be more around the $100 to $120 per night after tax.

This month I have 15 hotel nights planned with $750 for 9 paid nights and 6 free nights using Club Carlson points. That means I am paying about $84 per night after tax for the nine paid nights. Since I am staying 15 nights on $750 in November, my average room rate is $750 for 15 nights or $50 per night.

My average hotel rate does not fit on my first chart showing typical hotel room rates for brands like Four Points, Hyatt Regency and Courtyard and up to luxury level hotel rates.

Hotel points discount the average rate over the course of a year. I have 18 free nights in 24 nights of travel for September-November 2014. Drew and Carrie stay over 100 nights a year in hotels and spend far less than $80 per hotel night on average. Drew and Carrie of Travel is Free had an average hotel night under $30 per night for 158 nights at IHG. I calculate my average hotel rate for 15 nights in November to be about $50 per night. My teacher friend is looking at $150 to $200 per night for a week of holiday travel.

I needed another chart to show where frequent travelers using hotel loyalty programs fall on the average hotel nightly rate that includes discount hotel rates using hotel reward points.

Average hotel spend for all nights

My average nightly cost is greatly reduced when using hotel loyalty programs.

I figure I stay about 50 hotel nights for $3,500 or so over the course of the year after loyalty program reward nights are factored into the equation.

My Annual Hotel Spend is limited to $6,000

I want my lodging expenses to be less than $6,000 per year or $500 per month. This places me in the 50 nights at $100 average per night or up to 75 nights at $80 average rate per night. In general, I pay for about 50% to 75% of my hotel nights and use points and free nights for the others. Most of my paid hotel stays this past year average $100 to $120 per night after tax.

This means if I pay $300 to $360 on average for three hotel nights, I earn one free hotel night with points. Hotel loyalty program promotions allow me to earn about 10 free nights for 30 paid nights and reduces my net average rate to $75 to $90 per night when I am paying $100 to $120 per night for my paid nights. I buy hotel points when I can get better value from points than cash. For example, my purchase of $600 in Choice Privileges points were redeemed for more than $5,000 in room rates for 12 nights in Norway this year.

Several of my free night stays are earned by using points or cash and points rates. Many of the rates are reduced best rate guarantee claims meaning the price is dropped 20% to 25% for most brands or even free hotel nights with IHG and Choice Hotels. I make a lot of best rate guarantee claims to reduce the cost of hotel stays. I plan paid hotel stays around the best value hotel promotion bonus offers.

Finding your hotel price point

The Working Moderately Affluent Couple

Spending $1,500 for four nights in London or Paris might be the best solution for a truly relaxing vacation when you are people on the go with schedules and loads of time commitments. Last week I talked with a school teacher who said she and her husband simply pay whatever the hotel is asking at their destination and simply book lodging for convenience, They use their time saved not looking for lodging deals to focus on other aspects of their trip and lives. Saving $50 to $100 per night is not a priority for their time.

Spending $240 to $400 per night or $6,000 to $10,000 on hotels and other accommodations might be perfectly reasonable for a working couple’s lifestyle with around 25 nights of travel.

Scaling to nomadic travel: 158 IHG nights for $4,249

On the other end of the spending spectrum are a full-time traveling couple like Drew and Carrie of TravelisFree.com. Drew published a post two weeks ago detailing their IHG hotel expenses for the previous 14.5 months. They stayed 158 nights at IHG hotels with 84 nights at luxury InterContinental Hotels. Nearly 75% of their hotel nights were free using points. They spent $4,249 on 42 paid nights for an average nightly cost of $101.  Drew calculated their total nightly cost for 158 nights at IHG hotels was $26.89 per night. Drew  says they spent around 900,000 points for 109 nights on rewards. Most of us will not be able to earn that many IHG Rewards Club points on $4,249 and I imagine Drew will not have that kind of account balance to spend over the next 14.5 months. What I like about the data is this shows how lucrative hotel loyalty programs can be and IHG had several big bonus offers the past few years. No doubt earning 1,000,000 IHG points in the past few years was not too much of a challenge. The $101 average hotel night rate  for their 42 paid nights is more relevant to me for this analysis.

$27 per night and spending months of nights in InterContinental Hotels is an incredibly low rate for living in luxury hotels. For most of us though, the option to head to Ukraine or Vietnam for cheap hotel stays on low cost 5,000 points per night PointBreaks rewards is not really a fit for our rooted lifestyles.

We have jobs, families, friends, children and pets to care for and a nomadic life may be a travel dream, but is not truly our idea of a desirable lifestyle.

Two main points of this post are to think about your total lodging budget for the places you want to stay and factor how many nights in a year you need lodging. TravelisFree and Loyalty Traveler are bloggers who use hotel loyalty programs to greatly reduce the cost of travel.

For many of us traveling frequently with miles and points, we may have a need for 30 to 50 nights or more.  When you are chasing 25 nights for high elite with Hyatt or Starwood, you are generally looking at a minimum spend of $2,000 and very possibly $8,000+. Most of us need to set an annual spending limit for travel.

Once you pick a budget number for lodging each year, whether it is $2,000 or $5,000 or $8,000, then you can see how many nights you can afford to travel. You may reach a benchmark low rate like Drew and Carrie who stayed 158 nights at IHG hotels while spending $4,259.

My numbers in 2014 are more like 60 nights for $4,000 in spend, primarily in the USA across ten different hotel chains, Norway, London and Ireland.

Hotel Lodging Expense for 12 nights in London and Ireland

On my upcoming trip of 12 nights in Ireland and London, the numbers are looking like:

  • $240 for four paid nights at Radisson Hotels in Ireland.
  • $180 for two paid nights at IHG Hotels Ireland and London. This meets my Into the Nights promotion requirement for stays in two countries outside USA.
  • 170,000 Club Carlson points redeemed for six reward nights at Radisson Hotels in London. (Initial cost about $200 from two stays in years past and Club Carlson credit card enrollment bonus.)

Out of pocket = $420 for 6 hotel nights or $70 per night. Add in hotel loyalty rebates from previous Club Carlson stays and my cost for 12 nights drops to $35 per night. While the Club Carlson points had a cost in prior years, I do not count that cost in 2014. I count the cost of my IHG hotel stays in London and Dublin this year and the two free hotel nights at any IHG globally in 2015 will reduce the average hotel cost for my 2015 nights.

Money Spent per year for hotels (including points purchased) / nights in hotels = average room rate.

To keep it simple, I simply count up all the money I spend on hotels in a calendar year (including points purchased) and divide that amount by nights stayed (paid nights + reward nights) to get my average hotel nightly rate.

About Ric Garrido

Ric Garrido of Monterey, California started Loyalty Traveler in 2006 for traveler education on hotel and air travel, primarily using frequent flyer and frequent guest loyalty programs for bargain travel. Loyalty Traveler joined BoardingArea.com in 2008.

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Comments

  1. do u assume double occupancy for single occupancy? I am a budget traveler on my own budge with over 200 nights on the road. (400K miles flown). these type of budgets are unrealistic to me…

  2. Slight correction, it’s not the Ukraine but simple Ukraine. Would you say you’re heading to the Russia or the Brazil?

    Nice job showing how to determine what you’re spending and how points can help.

  3. Double occupancy or single occupancy is generally irrelevant in the USA. There tends to be no rate difference for one or two people.

    200 nights on the road and 400,000 miles flown is what is unrealistic for most of us. Where do you typically stay and what do you typically pay per night? The main idea of this article is every traveler has a lodging price point. What is yours?

    I look at 400,000 miles a year and quickly calculate that is 1,000 hours on planes. Add several hundred more hours for airport time.

    A typical 40 hour per week job is 2,000 hours a year.

    Are you a travel blogger?

  4. @omatravel – thanks for the correction. I agree.

    That was probably due to the country starting with a ‘U’ since it is common to say going to ‘the United States” or “the United Kingdom.”

    Do people generally say, “I am going to United States?” or “I am going to the United States?”

    Might just be my dialect.

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