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Hotel prices fell globally by 14% on 2008 figures, bringing prices back to levels not seen since 2003

Wednesday 3, March 2010

The average price of a hotel room around the world was 14% cheaper in 2009 than in 2008, according to the Hotels.com Hotel Price Index (HPI®). In fact, a hotel room was cheaper in 2009 than it was in 2004, when the HPI® began.

Rooms cost 13% less in Europe during 2009 than in 2008, 14% less in the U.S, 16% less in Asia and 21% less in Latin America. However, towards the end of 2009, the price falls started to level off. The average price of a hotel room fell by just 7% year-on-year in Q4 2009, compared to 14% in Q3, 17% in Q2 and 16% in Q1.

Hoteliers will be heartened that the market was showing signs of stabilising by the end of 2009, however, hotels around the world were still offering great value for travellers.

David Roche, President of Hotels.com:

Step inside the time machine, turn the dial back to 2003, and compare hotel prices then and now. What’s changed? Not much. Our latest Hotel Price Index, covering all of 2009, shows that prices fell globally by 14% on already weak 2008 figures, bringing consumer prices back to levels not seen since 2003. The rate of decline grew less steep over the year – from 16% down in Q1 to 7% down in Q4 – essentially the only silver lining for hoteliers in what was a very bad year for the industry.

Underlying this trend are some basic economics. Supply is still rising – there were 4000 hotel rooms added in Manhattan in just 12 months. Demand is falling, hit by a severe reduction in business travel and weaker consumer spending. The result: unprecedented falls in hotel prices.

Digging deeper into the data, we can see many new trends emerging. Domestic tourism offset the losses for some destinations as travellers decided to explore their home turf. Visitor numbers to New York were down just 3.9% in 2009 instead of the expected 5%-10% as the Big Apple became more affordable and accessible than ever before for domestic American travellers. London drew record numbers of Middle Eastern visitors who enjoyed five star hotels for longer periods. And Monte Carlo became the most expensive destination in the world, outranking heavyweight cities that have previously held the most expensive crown like Moscow, Dubai and New York.

While 2009 turned out to be the year of the deal, some cities did see the actual prices paid by travellers rise. Sometimes explained by currency movements, the rises were also a result of people paying a little more to move up a star rating.

The gap in price between 3, 4 and 5 star hotels narrowed in 2009, meaning travellers could trade up and enjoy luxury for less than ever before. Some destinations benefitted from the currency fluctuations, such as London, for example, which saw an influx of visitors taking advantage of the cheaper Pound. Occupancy rates in the British capital stood at a very healthy 82.9% at the end of the year.

2010 looks set to be the year when hotel prices stop falling, but despite some early indications of recovery (in occupancy mainly) in Q4 2009, few hoteliers expect any significant price rises. The traveller is set fair then for another year of extraordinary value. Just climb inside your time machine and see.

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