Limited Supply Of Hotel Rooms Forces Prices Higher

Jul 5, 2012
Originally published on July 5, 2012 10:25 pm



The hotel industry is making a comeback after being badly hit by the economic downturn. Turn find out what to expect the next time we check in, we called Barbara DeLollis, she reports on the hotels for USA Today. She told us that hotel construction deals canceled or postponed because of the credit crisis has now created a room crunch.

BARBARA DELOLLIS: The pipeline is at a record low right now, and you are seeing only, you know, less than one percent in new hotel rooms joining the system. And for consumers that's bad news because since we have limited supply. That means the hotel next door that might have opened and put their rooms on sale won't open and put their rooms on sale.

WERTHEIMER: Well now, presumably that is going to mean something about price. If there's a lot of demand and not so much supply then price goes up.

DELOLLIS: Yeah. Price is definitely already going up. You know, overall this year maybe five percent gain in rates for luxury hotels, about four percent for all the others. But it depends on where you are. New York is always the most expensive market in the United States. But other markets, San Francisco, Oahu, their rates are gaining at a faster clip even though they may not be the most expensive markets. So it depends on where you are.

WERTHEIMER: Now the kind of travel that's going on, business travel or vacation travel - I assume both categories were hurt by the recession. We've heard about people switching to teleconferencing instead of holding conventions. We've heard about staycations - a very funny word that came out of the recession where people just took their vacations at home.

DELOLLIS: Yeah. Well, traditionally leisure travel isn't hurt as much because people can still, like you said, instead of flying somewhere they can stay at a hotel that they can try to. But, you know, both were hurt and both are coming back. Leisure travel this summer, you look at a company like Best Western. They're saying that between Labor Day and Memorial Day advance bookings, this summer, are looking up by about 21 percent, which is significant.

WERTHEIMER: I would say that's huge.

DELOLLIS: And in terms of business travel, you know, companies are pretty optimistic that they're increasing their travel budgets. They're still trying to save money. You know, they're very cost-conscious. They want their travelers to, you know, get as much as they can included in their hotel rate. But there's nothing that beats that face-to-face meeting to clinch a business deal.

WERTHEIMER: What about foreign travel?

DELOLLIS: We're seeing foreign travel really help markets like New York, San Francisco, Boston, Chicago, the big gateway cities. The biggest hope is that the China market will explode. They're starting to trickle into the United States right now so you're starting to see hotels, for example, the Marriott Marquis in New York City, the recently renamed some of their suites. Instead of them having them be 44, 45 of the 44th floor, they gave them a different name, the Imperial suite, for example so that, you know, in China you don't want to have the number four. It's considered unlucky. So you're seeing hotels in the United States start to cater to the Chinese traveler.

WERTHEIMER: I wonder if hotels are going to begin to do something similar to what the airlines have done as a way to raise prices to maybe charge you for things that you have some expectation are going to be free.

DELOLLIS: Right now the biggest hot topic in the industry is Wi-Fi. The hotels they give Wi-Fi away for free, which are, you know, maybe the Courtyards, the Hilton Garden Inns, some of these hotels are starting to talk about, at least, should we start offering an optional upgraded Wi-Fi for a fee. You know, business drivers get into their hotels, at six o'clock everyone fires up your laptop in it's sluggish. You know, and who can think of a worse thing than slow Wi-Fi when you have to get some stuff done or you want to talk to your family or check your Facebook page?

So hotels are starting to try and figure out a solution. Do we keep offering it for free and just try, as best we can, to address complaints? Or do we potentially offer a tiered system, where you can still have your free system for checking email, for example, but then maybe you can pay a certain amount of money? Maybe five or six or seven dollars where you can then, you know, watch your Hulu, your Netflix, you know, check your Twitter account, things of that nature. No one has really pulled the trigger on that yet on a brand-wide level, but, you know, we do know people are testing it quietly. So if you see that in your hotel, don't be too surprised.

WERTHEIMER: Barbara DeLollis is the hotel check-in columnist for USA TODAY. Thank you very much.

DELOLLIS: Thanks, Linda.


Now, if you're looking for some less traditional lodging, the magazine Budget Travel offers some suggestions. It keeps a list of the world's most unusual hotels. And on that list is an oil rig in Malaysia that has been turned into a scuba diving resort. A lift lowers guests into the water to explore a coral reef below.

WERTHEIMER: For people who get bored easily, there is a revolving hotel in Turkey where you can go to sleep gazing out at one view and wake up the next morning to different scenery.

INSKEEP: And our last word in business is another on that list: adult lodging for kids at heart. A hotel in Sweden provides travelers a chance to relive a childhood fantasy, camping out in a tree house.

KENT LINDVALL: I built tree houses when I was young and then I feel in a way a strong freedom to sit up in my tree house and look down to the other people.


WERTHEIMER: That's the owner of the Treehotel, Kent Lindvall. The hotel has only five rooms, each architecturally unique and each sitting high up in its own tree.

INSKEEP: One of the rooms looks like a giant bird's nest, another has an exterior made of mirrors so that it blends in with the rest of the forest. Mr. Lindvall says most of his guests are actually city people who never had their own tree houses growing up.

WERTHEIMER: Now they can enjoy the experience for about $600 a night. In that is the business news on MORNING EDITION from NPR News. I'm Linda Wertheimer.

INSKEEP: And I'm Steve Inskeep. Transcript provided by NPR, Copyright National Public Radio.