How Hotel Rates Will Grow in 2018

For the first time since mid-2009, the hotel industry saw its longest stretch of growth in 2017. According to NASDAQ research, GDP grew at a seasonal rate of 2.6% in Q4 of 2017 that came after 3% growth spurts in the previous two quarters. In large part, this is due to consumers spending 3.8% more in the last quarter of the year.

This trend is expected to continue its ascent throughout 2018, especially since January’s Consumer Confidence Index rose 2.3 points from its downfall in December. This means that more consumers will be booking trips, using travel management apps, and seeking the best prices in the market.

Here’s what you can expect when it comes to hotel rates for the rest of the year.

Hotel Rates’ Fluctuation by City

Large metropolises have noticed growth and opportunity in the hotel industry, while the smaller cities are moving more slowly due to an increase in supply and decrease in demand. However, some larger cities are taking greater hits than others.

Houston, for example, has seen a decrease in average daily rate (ADR) by 2.5% due to the damage from Hurricane Harvey in August 2017.  New York City has had no growth when it comes to ADR, likely due to the newer hotels outside of the city offering attractive rates. Atlanta, on the other hand, has seen an increase in ADR by 2.2% due to Mercedes-Benz’s HQ moving from New Jersey.

The Economy Impacting Hotel Rates

PwC released a 2018 forecast that notes eight straight years of growth in revenue per available room (RevPAR), a highly coveted metric in the industry. The company states that a stable economy and tax stimulus will continue to push for the highest occupancy level in thirty-seven years, coming in at 66.1% for U.S. hotels.

Despite climbing to new occupancy records, corporate transient travelers’ demand is expected to grow slowly. The rise in consumer spending and potential for corporate transient demand may encourage a slight uptick in ADR growth as compared to 2017. In fact, PwC stated that “the corporate transient segment—and its counterpart, group travel—largely considered the bread-and-butter business for many hotels, continues to exhibit anemic growth.”

Hotel Rates by Chain Type

Not only are hotel rates changing by the city, they are also fluctuating depending on the hotel type. Overall, PwC predicts that the U.S. ADR will rise 2.4% to reach $129.72 this year, which is not far off from Amex’s estimate of 2.5%.

The economy hotel sector has seen the greatest rise in ADR at 2.8%, with the independent sector right behind it at 2.7%. This is in thanks to the online marketplaces that expose independent hotels to a global travel audience. With the ease of discovering and booking trips, boutique hotels are benefitting from the democratization that the internet offers.

For your next corporate trip, let Adelman Travel be your go-to resource for securing the best rates. We’ve been in the travel industry for over three decades, helping clients of all sizes with a wide range of budgets. Give us a call today at 800-248-5562 to get started on planning your next corporate trip.