Price Forecast: Hotel Rooms

Categories : Category Insights
  • Tags : Travel & Fleet | Hotel Rooms | Price trend | Price forecast | Procurement research | Category market forecast

Recent Price Trend - Hotel Rooms

The average price of hotel rooms has been increasing at an estimated annualized rate of 4.2% in the three years to 2017. Rising demand stemming from increases in domestic trips by US residents and inbound trips by non-US residents has driven price growth. Consumers taking trips often stay in hotel rooms while they are away. Therefore, more trips push up demand for hotel rooms. To a lesser extent, a rise in per capita disposable income has also contributed to demand growth by providing consumers with more capital to spend on trips and hotel rooms.

Suppliers’ rising input costs have also impacted prices because they have passed their cost increases to buyers in the form of higher prices. There are two main categories of purchases for suppliers: food and beverages and room supplies. In the three years to 2017, the price of food and beverages has been rising, as have marketing, utility and other operating costs. These cost increases have been contributing to price increases for full- and limited-service hotel rooms.

Despite rising prices, low price volatility has benefited buyers by protecting them from extreme fluctuations in room rates and allowing them to more accurately predict and budget for the cost of hotel rooms. Overall, however, the level of price volatility has not significantly impacted buyers’ purchasing decisions because, although low price volatility has reduced the probability of price spikes, it has not prevented gradual price increases. Buyers that need to go on trips often do not have much leeway in terms of when or where they go. As a result, demand remains high despite price growth. Booking rooms as far as possible in advance of an event often yields lower rates.


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