Hotel rate hikes: how much is too much?

Data from travel intelligence provider Mabrian shows that hotel prices in August 2023 increased by 64.03% in North America compared to 2019

(Source: Belvera Partners)

Since the pandemic, hotel room prices have risen dramatically, and this summer travelers paid prices that far exceeded those of 2019 or ever before. In fact, according to data from travel intelligence provider Mabrian, in August average hotel prices compared to 2019 rose by 16.75% in Europe, 48.5% in Asia and a huge 64.03% in North America.

Will this trend continue or will it slowly disappear as "revenge trips" fade? At what point do very high prices become counterproductive because guests feel ripped off and won't return? And what role do technology and innovation play in responding to all these challenges?

We've spoken to experts across the travel supply chain to get their take on whether tariffs are here to stay and how the industry should respond.

According to Christian Sabbagh of software-as-a-service (SaaS) group Travelsoft, owner of distribution platforms such as Traffics, Orchestra and Travel Compositor: “Travel agencies and third parties can develop new strategies to help customers find great room deals. while continuing to offer competitive prices. Additionally, as customer demand continues to grow, providers can expand their services with innovative approaches such as dynamic pricing models or integrated loyalty programs that reward users who book multiple stays at affiliated properties.”

Hotel revenue management experts at BEONx warn that above-average prices are unlikely to last forever, as consumers won't put up with it even if they have the money. BEONx Marketing and Innovation Director Alex Barros comments: "How much is too much? It's not really about absolute price, although it's clear that all travelers are on a budget, but rather the perception of value. Yes Someone has stayed at your hotel before for half the price, this time they expect things to be twice as good and if they're not, you hurt your brand. Instead, think of other ways to get more benefits from each guest apart from the price of the room. Could you sell more food and drinks or give them a guided tour of the city? There is always a way to make more value for each guest and technology is almost always part of that process."

For its part, Didatravel, a global travel distribution provider, says that hotels should focus on differentiation. Marketing Director Gareth Matthews said: "While demand for travel is high, hotels should focus on offering unique, high-quality experiences to justify higher prices. Travelers pay more, but expect more in return and, "If a property doesn't offer it, they're more likely to leave bad reviews or simply not come back. People want more for their money and want higher prices to be reflected in the service they receive."

As a final reflection on the subject, there are those who believe that many consumers still want to save money and stick to a budget, so they will not go on a trip: this is what Digitrips, owner of the multi-product travel platform MisterFly, thinks. Its CEO, Emilie Dumont, warns hotel suppliers and third-party distributors that: "Not all travelers can or want to pay these higher prices; there is a large group of people who will appreciate discounts, incentives, loyalty programs and special offers. If we want to avoid low hotel occupancy in the long term, it is the responsibility of the tourism sector as a whole to help agents and OTAs take advantage of the lowest possible rates for this market. Our recently launched Best Price Tracker, which allows travel sellers to benefit from more favorable rates if the price drops between the time of booking and the date of travel, is a step in this direction."

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