Hotel Rates Rising in Key Markets

According to the latest edition of Business Travel News’ Corporate Travel Index, the average cost of a hotel room in the U.S., including taxes and fees, rose from $177.36 in 2016 to $180.12 in 2017.

Perennial gateway cities topped the chart. New York’s average daily rate was $392.95, followed by San Francisco at $387.20, Boston at $344.49 and Washington, D.C., at $325.30.

The biggest jumps in hotel costs came in cities near Silicon Valley, and travel managers can expect rates in these cities to keep rising. It’s so expensive in San Francisco, demand spilled over to nearby Oakland and San Jose. Oakland’s average hotel room rates rose 8.5 percent to $242.42, and San Jose’s rose 6.5 percent to $278.75.

The Pacific Northwest is seeing similar drivers for its rising hotel costs. ADR in Seattle rose 6.3 percent to $269.29, thanks to the expansion of big companies like Amazon and Microsoft.

In the middle of the country, Nashville’s hot convention market drove average hotel rates up 5.2 percent to $221.97.

Not all the biggest movers went higher. Minneapolis hotel rates fell 5.9 percent to $200.81, due to oversupply, which kept hoteliers from being able to command higher rates during negotiations.

New York has cooled from previous years, due to more midscale and lower-upscale hotels entering the market. Airbnb also may figure into the New York story, as tight availability has undoubtedly driven corporate clients to the sharing economy.

Corporate travel management executives called Atlanta a market to watch, based on the possibility of the city snagging the new Amazon headquarters. While awaiting word on that decision, other companies are talking about expanding into the city, and should that happen, it’s likely hotels there will increase corporate negotiated rates significantly as a result.

None of the consultants contributing to the report expect business travel demand for hotel rooms to diminish anytime soon. This aligns with the U.S. Travel Association’s outlook for business travel, which predicts the number of domestic business trips will rise to 473 million in 2018, up 9.1 million from its estimate for 2017. Moral of the story: Don’t expect prices to go down. Sharpen your negotiating pencils.

(Business Travel News)

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