Rates are decreasing at budget hotels; however, this doesn’t imply extensive discounts – The Points Guy

This summer, travelers may not find significant discounts when booking hotel rooms in the United States, though some market segments are showing signs of softening.

However, it’s somewhat early to celebrate the prospect of any upcoming deals.

Hotel data company STR has updated its forecast for the rest of this year, lowering anticipated average daily rate increases due to weaker-than-expected hotel performance in the U.S. so far. However, the decline in hotel rates is not being experienced universally.

Related: According to Google, these are the most popular summer travel destinations for 2024.

Amanda Hite, the president of STR, stated, “Over the first four months of the year, we’ve noticed a divergence in hotel performance that we don’t expect to diminish anytime soon. The rising cost of living is impacting lower-to-middle income households and their capacity to travel, which is reducing demand for hotels in the lower price range. In contrast, the Upscale to Luxury tier is experiencing robust demand, although pricing power has weakened due to shifts in mix and travel patterns, and to a lesser degree, economic conditions. While travel remains a priority for most Americans, the volume has decreased as prices for goods and services continue to climb.”

Budget-friendly hotels are experiencing significant declines in their nightly rates, with a 2% decrease in this segment over the past 28 days. In contrast, upscale hotels (such as Aloft and DoubleTree) and upper upscale hotels (such as Westin and Hyatt Regency) have seen their rates rise by 1.9% and 2.6%, respectively, over the same period.

The adjusted forecast for potential hotel prices aligns with this week’s inflation statistics, revealing that U.S. hotel rates have dropped by 1.7% compared to the previous year. This marks a significant shift from the post-coronavirus pandemic recovery period, during which rising hotel rates were a primary contributor to overall inflation.

Remember that even though STR is not as optimistic about significant hotel rate increases this year, the company still anticipates U.S. hotel rates will grow by 2.1% this year and an additional 2% in 2025. These figures are approximately in line with what economists consider ideal inflation rates for the U.S. economy.

Moreover, a slight decrease in prices within the luxury hotel industry doesn’t automatically imply that the typical leisure traveler will find a deal when staying at establishments like Four Seasons or St. Regis. However, there’s a positive outlook: The decline in rates for luxury hotels can be attributed to the resurgence of business travel following the pandemic. This resurgence has led to the reintroduction of special corporate rates, which are negotiated and typically lower than the standard daily rates charged to most guests.

Naturally, this does not always benefit the typical traveler who wants to experience a luxurious hotel stay without overspending.

“The average daily rate for luxury hotels appears lower; however, this doesn’t imply that leisure travelers like you or I will pay less,” stated Jan Freitag, national director of hospitality analytics at STR’s parent company, CoStar. “Our rates will keep rising. It’s merely that the data reporting methodology alters the mix, incorporating more corporate transient bookings.”

Hooray for the return of business travel after the pandemic. However, it’s not so great for our finances… unless you’re opting for a more economical hotel brand.

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