As the world reopens post-COVID, travelers are noticing that nightly rates are higher than they have ever been – with hotels now charging a premium for entry-level rooms, with rooms with views and suites priced higher and higher. Hotel rate increases have become a common topic with clients of Ourisman Travel as well as an internal discussion the team is having regularly. There are a few factors that are contributing to this increase and we want to pull back the industry veil to give our clients a better understanding of why this is happening and if these increased rates are here to stay.
The first important influence on the current all-time high for luxury hotel rates is very straightforward: supply & demand. It seems almost too on the nose, but at the end of the day, supply & demand have a huge role in impacting the current high rates. After the past few years, travelers are ready to get back out into the world, and interest in travel is at an all-time high. With a finite number of luxury hotel rooms in any given destination, hotels are able to price their rooms at a premium because they know the room will be booked. We are seeing festive travel and other high travel times like spring break, the Thanksgiving holiday, and long weekends at especially high rates which do reflect trends of the past – even if the rates of 2022 and 2023 blow those of past years’ out of the water. The important thing to remember about this part of the equation is that eventually, the demand will level out as more and more people get back out into the world and scratch their travel itch. As the demand settles, the rates will begin to settle as well.
We must also remember that hotels and tour providers are doing whatever they can to recuperate from the losses of 2020 and even 2021. This is a motivation that many people outside of the industry might not consider, but it does play a role in the current hotel rate increases. As we move on from the pandemic and the travel industry recovers, we can anticipate that this driving force behind higher rates will fade away. However, this will likely not happen until 2024 when the travel industry is slated to have finally recovered from the devastating losses of the pandemic.
Inflation plays another important role here and unfortunately, while the demand for travel may level out over time, this driver for increased rates is here to stay. So while we can expect that the demand will go down over time as people have satiated the desire to travel, the increase due to inflation is here to stay. Inflation is a consistent driver for cost increases across the board, and hotel rates in 2015 were lower than the rates in 2018. What’s important to remember here is that while the rate increases feel extreme, likely due to them increasing all at once rather than slowly over time, hotel rate increases did happen from year to year.
So how do we navigate this current climate of out-of-this-world hotel rates? There are several ways to manage this and get the most for your money. The first is to plan far in advance and lock in a rate with a flexible cancelation policy. Once you have a reservation, you can keep an eye out for the rate dropping below what you booked at or any promotions that bring the average nightly rate down – a Third Night Free Promotion for example. Ourisman Travel is always happy to manage rate match requests that are straightforward, though we do reserve the right to charge a fee should they become excessive. A good rule of thumb here is to refrain from nickel-and-diming the rates and saving a request for when you save 50 USD or more per night when a rate drops.
Another way to mitigate the higher cost of luxury travel these days is to consider midweek stays rather than stays that fall over a weekend. While that doesn’t always work for everyone if you are able to book a Monday to a Friday you will likely find the rates to be lower than they are over the weekend. A third avenue to consider when planning travel amidst high rates is to collaborate with your travel advisor to find a boutique 4-star property in the destination of your choice to help you extend your budget. Team Ourisman is happy to help with these types of requests through our Hotel Plus Consultative service!
If you have more questions about the recent hotel rate increases and the current travel climate or want to inquire about a new trip, please reach out to the team via email at [email protected] or fill out our Travel Request Form.
