International Travel Summer 2008 – Room Rate Trends

Amsterdam Hilton, canal view

Smith Travel Research provides weekly room rate data for the US, monthly US room rate reports, and Global Room Rate data in different currencies for US Dollars, Euros, and British Pounds. An interesting feature of the Smith Travel research room rate data is room rates are displayed in different currencies. Year-to-year changes in room rates allows a comparison of the impact of currency exchange on room rates. I have wondered how different currencies correlate with room rate increases and decreases over the past few years as I travel to international places.

Room rates for the American hotel traveler increased significantly higher in just about every region globally for Americans and Brits on the order of 13% to 28% for April 2008 compared to April 2007. The Smith Travel Research Global Report for April 2008 shows average room rates year-to-year to April 2008 and the increase/decrease in room rates for a variety of international regions.

The $200US hotel room of summer 2007 will cost on average around $225 to $255 in summer 2008. The US Dollar lost 15% value against the Euro and the British Pound lost almost the equivalent value against the Euro while holding fairly steady against the US Dollar. The net effect is travelers using Euros will not see anything like the annual increases in room rates for Americans and British travelers going into summer 2008.

Buenos Aires Hotel Rates as Example of Currency Exchange Effect

The impact of currency exchange is easily seen with the example of Buenos Aires. Average daily room rate in Buenos Aires in April 2007 was $131.52 USD, or 98.91EUR, or 66.67 GBP.
April 2008 saw Buenos Aires average room rate rise to $152.06 USD (up 15.6%), 76.64 GBP (up 15.0%), but rates saw no increase when priced in Euros (98.89 EUR in April 2008 is essentially no change from 98.91EUR in April 2007). Travelers with currency and credit cards based in US Dollars or British Pounds saw a 15% rise in Buenos Aires hotel room rates while Euro travelers saw unchanged rates from 2007 to 2008.

In Europe the room rate increases that were above average for Europeans in places like Paris and Berlin were astronomical increases for American and British travelers. Paris escalated rates more than 10% in Euros, but those room rate increases were equivalent to a 27% year-to-year rise in rates after currency devaluation for Americans and British travelers exchanging to euros.

The data I displayed the other day showed British travelers are the largest block of overseas travelers to the USA. The cost of travel in Euros is a year-to-year shock for British travelers just as it is for Americans going to Europe in Summer 2008. The USA may be a bargain destination in terms of the overall cost of hotel rooms in most places, however, for Europeans there are many regions of the world that are also a better value this summer than last summer.

For many Europeans, UK hotel rates have declined over the past year. London hotel rates actually increased 6% priced in British pounds and American travelers will have the full effect of the rate increase paying in US dollars. Europeans exchanging euros for pounds actually have an 8% decline in room rates over the past year due to the strength of the euro currency this past year.

Comparing April 2008 and year-to-year room rates in US Dollars, Euros, and British Pounds:

Europe
Paris, up 27.5%, $207.23 to $264.28
(EUR +10.3%, 155.76€ to 171.88€)
(GBP +26.9%, £105.00 to £132.22)
Paris average room rates now surpass London, New York, and Rome. Finding a bargain for Paris is essential to make an affordable leisure vacation. Look to loyalty program specials for discount rates. Anticipate more hotel category increases for free night redemptions using points from Starwood, Hilton, and Marriott for hotels in Paris in 2009.

Berlin, up 24.4%, from $109.18 to $135.79 US
(EUR +7.6%, from 81.95€ to 88.17€)
(GBP +23.8%, from £55.32 to £68.46)
Germany has been one of the bargain hotel destinations in Europe with minimal room rate increases during the past few years. Even with the 24% rise for Berlin hotel rooms in the past year, this city is a bargain compared to Paris and Rome. Berlin is a great jumping off point for Eastern Europe. Beware that major hotel chains in cities like Prague and Warsaw may price rooms in Euros rather than their own national currency, and good value is often more difficult to find with the major hotel chains in Eastern European cities.

Madrid, up 20.5%, from $149.19 to $179.79
(EUR +4.3%, from 112.15€ to 116.96€)
(GBP +19.9%, from £75.62 to £90.65)
Moderate rate increases of 4.3% are not highly inflationary for Europeans. Most of the room rate increase for Americans and British is due to currency devaluation against the Euro.

Rome, up 17.6%, from $190.89 to $224.49,
(EUR +1.8%, from 143.05€ to 145.63€)
(GBP +17.2%, from £96.63 to £113.22)
Slight rise for Europeans is a significant rise for Americans due to currency exchange rate for US dollars to Euros over the past year.

London, up 6.6%, from $207.93 to $221.62
(EUR -7.7%, rates actually decreased from 156.37€ down to 144.26€ for April 2008)
(GBP +6.0%, from £105.38 to £111.72)

Average Room Rate Increases from April 2007 to April 2008
Unfortunately for the American traveler there are double digit increases in hotel rates around the world for summer 2008. Hotel average room rate increases top 20% for the past year in Sydney, Australia and Tokyo, Japan. Bargain destinations like eastern European countries, North Africa, Southeast Asia, and South America are seeing large hotel room rate increases. This data shows New York City average room rtes at $250 significantly lower than the $477 average rate cited from the newspaper at the end of my post last week.

Australia
Sydney, up 22.9%, from $150.10USD to $184.48 USD
(EUR +6.3%, 113.00€ to 120.14€)
(GBP +22.1%, £62.47 to £75.22).
No wonder British travelers are cutting back on Australia travel for 2008.

Asia
Tokyo, up 21.5% from $146.99 to $178.61 (EUR +5.2%) (GBP +20.8%)
Beijing, up 14.4% from $107.06 to $122.43, (EUR - 1.1%) (GBP +13.9%)
Hong Kong, up 14.0% from $170.86 to $194.71 (EUR -1.4%) (GBP +13.4%)

Middle East/North Africa
Cairo, up 26.8% from $95.17 to $120.70, (EUR +9.7%) (GBP +26.1%) Egypt has been one of the cheapest bargain vacation spots for Americans for several years and hotel rates are now seeing dramatic rises. $65 per night for upscale resorts may become a thing of the past.

Dubai, up 13.0% from $311.44 to $351.94 (EUR -2.2%) (GBP +12.4%) Dubai has seen double digit increases in USD room rates for the past several years and is now one of the most expensive vacation destinations of the world.

Americas
Toronto, up 16.6% from $118.52 to $138.14 (EUR +1.0%) (GBP +16.0%)
Buenos Aires, up 15.6% from $131.52 to $152.06, (EUR 0%, no change) (GBP +15.0%)
New York, up 8.1% from $231.40 to $250.19 (EUR -6.4%) (GBP +7.7%)
Los Angeles, up 5.7% from $121.90 to $128.90 (EUR -8.5%) (GBP +5.2%)

data from Smith Travel Research
http://www.hospitalitynet.org/file/152003410.pdf

Another set of data from TRI Hospitality Consulting focuses on European cities year-to-year room rate changes. I believe this data is based on a subset of hotels used for Smith travel research with a focus on the upscale and major hotel chains. These numbers are probably more accurate for American loyalty program members seeking a Starwood, Hilton, Marriott, or InterContinental hotel in Europe.

Hotel travel trends show declines in room occupancy for most major European cities going into summer season 2008 compared to 2007 with the exception of Paris and Budapest. I read last year when planning a trip to Prague that Budapest had become the new Prague – a place to vacation cheaply in a major European city for hotel stay guests as well as backpackers seeking fun and cheap touring locations.

The TRI data support the commonly written travel advice for Americans going to Europe. Eastern Europe allows your dollar to go farther. Budapest and Warsaw showed minimal average room rate increases of around 3%, while Prague actually had an 8% drop in room rates in Euros. Factor in currency exchange and average room rates went up about 18% for Americans in Warsaw and Budapest, and about 8% for Prague from 2007 to 2008.

Eastern Europe Average Room Rates in April 2008
Budapest 98.33€
Prague 107.15€
Warsaw 106.92€

Berlin, Germany is significantly more expensive for hotels in 2008 at 151.11 €. The TRI data has a focus on major hotel chains, but when compared to Smith Travel Research showing average hotel rates for Berlin at 88.17€ , there is such a dramatic variation of average room rates for Berlin that I don’t know what to make of the data.

The more interesting feature of the TRI major European cities hotel room data is the decline in room occupancy in April 2008 compared to April 2007. A couple of cities showed greater than 5% decline in room occupancy over the past year, while most cities fell 1 to 2% in the past year.

Amsterdam dropped over 3% in hotel room occupancy from 86.0% in April 2007 to 82.9% in April 2008. Vienna dropped nearly 6% in room occupancy from 77.5% in April 2007 to 71.7% in April 2008.

Amsterdam, Berlin, Munich, and Warsaw all saw room occupancy decline in the 4% to 5% range for a similar 4 month period from 2007 to 2008.

On the upside for hotels, Paris showed a slight increase in room occupancy despite the escalating average room rate. Budapest saw the greatest increase in occupancy with a 3% rise over 2007.

London 79.1%, Paris 78.0%, and Amsterdam 74.9% had the highest room occupancy rates of the European cities surveyed.

Berlin 59.9%, Budapest 62.5%, Vienna 62.5%, and Prague 63.3% had the lowest occupancy rates.

Priceline to the rescue

Amsterdam saw a year-to-year 5% decline in occupancy while room rates rose 10.49EUR to ADR of 168.94 EUR.

Checking Priceline rates on BiddingforTravel, I see the Hilton Amsterdam is going for around $141/night for July dates. The $141 Priceline rate is quite a savings on the 174 EUR nonrefundable rate for July 14, 2008 on the Hilton website. (174 EUR x $1.57 = $273 US).

Conclusion

European hotel travel on average is significantly more expensive in 2008. Hotel bargains are still out there and I regularly point out special European hotel rate special offers from the major hotel chains. Hotel special offers like IHG British hotel discounts and Priceline bids are the strategies for dealing with the high cost of hotels. Paris in 2008 might be a challenge due to the perfect storm of high hotel occupancy, high rate increases, and the poor exchange rate of the US Dollar.

European hotels may find rate discounts necessary to attract British and American travelers seeking better vacation bargains. As Europeans flex their currency muscle with expanded international travel to other regions of the globe the impact may be an additional factor on European room occupancy. While the Caribbean may be discounting their high rates to attract more Americans, the region is still one of the most expensive in the world for hotels. Europeans truly benefit from discounts in the Caribbean where the price of hotels has dropped on average over 20% in the past year, mostly due to currency exchange fluctuation.

The European vacation looks more out of reach for the average American traveler as airfares have increased in 2008 and are less likely to go back down in the current airline industry climate. Hotel rates are still increasing in almost all regions of the world and show few signs of backing down at the present time. Fortunately, the US Dollar has been holding at about the $1.55 = 1€ range for the past few months and we may have less fluctuation of exchange rates over the next year to impact room rate increases.

International travel for Americans in 2008 will likely be significantly more expensive than the past few years. Indicators are showing a decline in hotel occupancy in many regions of the world. The economic conditions in regions like the USA and the UK may place a damper on international travel.

83% of overseas travel by Americans is leisure travel. In my opinion, at some point in the next year, the global economic pressures will likely force hotels to begin bringing rates down. Apparently, the hotels do not see these economic pressures threatening their industry at the present time as rates continue to climb. Another year of occupancy declines in the 5% to 7% range for some tourist oriented locations may initiate a rethinking of the escalating room rates.

And for the loyalty traveler I see good news on the hotel loyalty promotions front line. Higher rates and declining occupancy, particularly among leisure travelers, is going to keep the hotel loyalty program strategists planning plenty of new incentives to get leisure travelers into their hotel brands. This Loyalty Traveler anticipates more lucrative promotions coming to frequent guests in 2008 and 2009.


USA Travel

There was a decline in room revenue from Memorial weekend 2007 to 2008. This indicates loyalty program promotions are needed to entice the leisure traveler. There were plenty of new promotions announced in June as part of the summer campaign. I anticipate plenty of mid-summer promotions if the hotel occupancy doesn't pick up and revenue shows more declines. The three weeks since Memorial weekend have seen room revenue declines overall in the USA. The high cost of travel in chilling travelers just at the start of the busy summer leisure travel season.

The past month has shown the average daily rate for hotel rooms on Friday and Saturday night have generally increased 3% to 4% year-to-year in May 2008 while occupancy has generally declined 3 to 4% for weekend hotel stays. The greatest room revenue declines are being posted for Friday and Saturday nights. Are hotels going to get the message that leisure travelers have reached their limit on higher prices? Summertime and the living ain't easy for vacations.
Commentary based on data from Smith Travel Research at http://www.hospitalitynet.org/file/152003414.pdf


Room taxes in the USA average 13.4% for 2008
http://www.hospitalitynet.org/news/154000320/4036511.html