Are hotel room rates too high?
The rates may be too damn high.
Thanks to surging demand, hotel rates have skyrocketed this summer, with some particularly hot markets, such as Hawaii and Florida, reaching record highs.
The phenomenon isn't limited to resort destinations, however. According to STR data for the week of June 11, the U.S. hotel industry as a whole saw its weekly ADR reach $155, which marked the second-highest nominal level ever recorded. That rate was also 23% higher than the weekly ADR the year prior, as well as 15% above the ADR for the same week in 2019.
Of course, hotel executives have pointed not only to demand but also rising operational costs as a key factor behind rate hikes. During a media Q&A session at the 44th Annual NYU International Hospitality Industry Investment Conference, held in New York last month, Hilton CEO Chris Nassetta cited more costly labor and the fact that other "input costs have gone up dramatically" for hotel owners.
"Everything's more expensive these days," said Nassetta.
Still, hotel rate increases appear to be outpacing general inflation.
STR reported that for the week of June 11, 40% of hotels had a weekly ADR that was 20% or more above 2019 comparables, which is well above the year-to-date inflation rate of 13%.
That said, there are some early signs that travelers may have reached their limit when it comes to hotel pricing.
A recent report from Inntopia's DestiMetrics, for example, indicates that summer booking pace has already slowed significantly at properties across several key Western mountain destinations. The data shows that booking pace for arrivals from May through October has dropped 40.4% from last year at 17 mountain destinations across Colorado, Utah, California, Nevada, Wyoming, Montana and Idaho. Booking pace has also declined 20.6% from 2019.
