For a few years, travelers had it good. Hotels were hurting for business and slashing prices to put “heads in beds,” as they say in the industry. The proliferation of daily deals and flash sales added to the growing number of websites and mobile booking apps that delivered rock-bottom rates.
Hope you enjoyed that pillow-topped opportunity while it lasted, because the hotel industry has bounced back in a big way. This summer, you’re more likely to find an empty chaise lounge poolside at a packed resort than a deeply discounted room.
Occupancy rates around the country started rebounding to their pre-recession norms over the past several months, with no signs of stopping as travel of all sorts picks up. Business travel is going to grow by about 5% this year, the Global Business Travel Association says, while the U.S. Travel Association says spending by foreign visitors to the United States rose nearly 6% in the first quarter of this year compared to last year.
And don’t forget about rich people. “Higher-income individuals and families are still traveling. They have been less impacted by the lagging recovery in employment, and have benefited from rising real personal income,” says Robert Mandelbaum, director of research information services at PKF Hospitality Research.
Fuller planes also increase demand for hotel rooms, and not just because the people on those flights need a place to stay when they get to their destinations. Fewer seats means fewer free seats, so many frequent flyer programs have been turning to hotel room nights as an alternative reward. “Among the top 15 airlines, only US Airways and those based in China don’t offer car and hotel rewards,” research company IdeaWorks said in its annual survey of frequent flyer programs.
In an ordinary market, hotel rooms supply would expand along with demand. But the recession and subsequent credit crunch kept developers from finance new projects, so the number of hotel rooms today grew less than 1% from last year. Construction of new rooms is now booming — consulting firm STR Global says nearly 73,000 rooms are being built right now, an 18.5% leap over last year — but none of that construction will do this year’s summer vacationers any good.
Combine the increased demand with tight supply and you get a major seller’s market for hotel rooms. “If you want to go to a destination that everyone else wants to go to, then you will have a tough time finding a deal – now or later,” Mandelbaum says.
“Fifteen of the 50 major U.S. markets that we track have already reached their pre-recession peak levels of occupancy,” PKF president R. Mark Woodworth told industry website HospitalityNet two months ago. “The scarcity of available rooms provides management with the leverage needed to increase prices.”
Nationwide, summertime room rates last peaked in 2008 with an average rate of $107.75, says Chad Church, senior director of operations and client services at STR (Smith Travel Research, part of STR Global). This year, that average will zoom up to $112.21.
Those climbing rates aren’t deterring demand, so hotels don’t need to resort to fire sales. That’s good news for them, but bad news for frugal-minded vacationers or procrastinators who think waiting until the last minute will net them a bargain. “The availability of last-minute travel deals should be less prevalent in 2013 compared to recent history,” Church says. “Hoteliers are likely to feel more comfortable holding their rate and not promoting last minute deals or flash sales.”
So what are your options if you do want to stay cheap this summer? “If bargains are to be found, you need to go to markets that are winter seasonal. Hot markets like Arizona, or ski markets in the Rocky Mountains,” Mandelbaum says.
In general, expect that any attempt to find low rate will take more time and effort this summer, says Bjorn Hanson, divisional dean and clinical professor at New York University’s Preston Robert Tisch Center for Hospitality, Tourism and Sports Management. “Travelers will be required to be more diligent and creative.”