Are hotel room rates too high?


Thanks to growing demand, hotel rates have skyrocketed this summer, with some particularly hot markets, like Hawaii and Florida, hitting record highs.

However, the phenomenon is not limited to resort destinations. According to data from STR for the week of June 11, the US hospitality industry as a whole saw its weekly ADR reach $155, which is the second highest nominal level on record. This rate was also 23% higher than the weekly ADR of the previous year, as well as 15% higher than the ADR of the same week in 2019.

Of course, hotel executives pointed to not just demand, but also rising operating costs as a key driver of rate increases. During a Q&A with the media at NYU’s 44th Annual Hospitality Investing Conference, held in New York City last month, Hilton CEO Chris Nassetta , referred to more expensive labor and the fact that other “input costs have risen significantly” for hotel owners.

“Everything is more expensive these days,” Nassetta said.

Yet increases in hotel rates appear to be outpacing general inflation.

STR reported that for the week of June 11, 40% of hotels had a weekly ADR 20% or more higher than 2019 comparables, well above the 13% year-to-date inflation rate. .

That said, there are some early warning signs that travelers may have reached their limit when it comes to hotel prices.

A recent report from Inntopia’s DestiMetrics, for example, indicates that the pace of summer bookings has already slowed significantly at properties in several key western mountain destinations. Data shows the pace of bookings for May-October arrivals fell 40.4% from a year ago at 17 mountain destinations in Colorado, Utah, California, Nevada, Wyoming, Montana and Idaho. The rate of reservations also fell by 20.6% compared to 2019.

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