2017 Hotel Rate Predictions
This month we’re taking a look at the outlook for corporate travel costs in the new year. Last week we surveyed the various projections for airfares, which have been falling in recent years and will remain relatively cheap in 2017. Today we’re turning our attention to hotel rates.
If you’d like to see our complete analysis, be sure to download a copy of Rocketrip’s latest e-book, What to Expect from Corporate Travel in 2017. It provides an all-in-one overview of price predictions for air travel and hotels, as well a recommended set of travel policy updates that will help your company better manage its T&E expenses.
Tight Hotel Supply, Elevated Hotel Rates
In contrast to the trend for air travel, hotel costs have been rising as of late. In the post-recession recovery, new hotel construction has lagged behind traveler demand. According to STR, Inc., the U.S. saw a record high for overall hotel occupancy in 2015, and since then there’s been little change. In 2016, occupancy levels remained near their all-time peak, and that resulted in a 3.1% increase in the U.S. average daily rate (ADR).
Limited Price Increases in 2017
So, in other words, the accommodations market is hot. 2017 will bring a slight cooling, though not enough to substantially reduce occupancy levels – or room rates. Moderate price inflation will be the overall trend, though some key markets will see another year of significant increases.
CBRE, a commercial real estate advisory firm, predicts that occupancy rates will fall just 1.% in 2017. Hotels are still operating at near record capacity. That means the U.S. ADR will increase yet again, but only by a relatively modest 3.3%.
If that prediction holds, 2017 be the the third consecutive year that the ADR growth rate has been slowing. (CBRE’s data on the U.S ADR differ slightly from STR’s, but these and other analyses are in basic agreement. For instance, Advito’s 2017 Industry Forecast for Corporate Travel predicts that room rates in the U.S. and Canada will increase anywhere from 3% to 5%, while Travel Leaders Group pegs the expected increase lower, at 1.53%.)
No Relief for Most Expensive Markets
Despite the overall flattening of U.S. hotel rates, supply remains tight in several key markets, including San Francisco and Washington D.C., where the Travel Leaders group forecast suggests ADRs will increase more than 6%.
Rocketrip’s analysis of 2016 business travel spending reveals these as some of the most expensive cities for domestic business travelers – as well as ones where Airbnb offers the greatest potential savings.
