Buyer Beware: Hotel Room Rates Continue to Grow

May 18, 2015

During recent travel, have you noticed a steady increase in room rates? If so, you aren’t the only one. The hotel industry is booming!

I often tell my Hotels for Hope Crew that hotels are “fat, drunk and happy.” You can’t blame them either. We haven’t seen such demand since 2005. Companies have money to spend on travel, families are parlaying new income into experiences and hotel inventory is low.

I certainly respect hotels abilities to maximize revenue…as long as my perceived value remains intact. I’m a sucker for a hip hotel. But, I’m also conscious of the cost.

For buyers, there is a silver lining though. As new inventory hits the market, older hotels are spending money to renovate their product. On recent trips, I’ve definitely experienced a wave of newly renovated hotels (mainly targeted at a Millennial demographic). You can see some below.

So what does it all mean?

Simply put, buyer beware. If supply and demand projections align then 2016 occupancy will be the highest ever recorded.

NA-Occupancy

TravelClick reported 2015 Q3 and Q4 reserved occupancy are up 3.1% and 5.7% respectively.

Higher occupancy generally equates to higher rates (supply vs. demand). For 2015, Average Daily Rate (ADR) is up 4.6% based on reservations currently on the books. Broken down, group ADR is growing at 3.8% while transient ADR is at 5% (compared to 2014).

Ironically, even with all this rate growth, the hotel industry still lags behind other US goods & services.

Photos Google

Does this mean, the hotel industry has more room to grow? I think so.

My Advice…

Don’t fret over these high rates…there is an end in sight. My assumption is that the market will stabilize by the end of 2016. In the meantime, continue to travel. There is nothing better than experiencing the world and meeting new people.