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Hotel room prices rise 4.3% in 2011

Los Angeles hotels, however, post a 2.4% decrease. Rates are expected to rise nationwide as travel in the U.S. grows, creating more demand for hotel rooms.

January 07, 2012|By Hugo Martín, Los Angeles Times

With business and leisure travel growing, the average price for a hotel room rose 4.3% nationwide last year and is expected to climb further this year, helping the industry rebound from the Great Recession.

The higher rates also reflected the limited growth in the number of new hotels, according to industry analysts.

Last year's increases and this year's projections came in separate studies that looked at hotel bookings over the last year and advance bookings into the next nine months.

At the end of December, hotel rates nationwide were up 4.3% from a year earlier, to an average daily rate of $107.56, according to a study released Friday by STR Global, a hotel research firm in Nashville.

The number of hotel rooms in the U.S. grew only 0.6% last year, said Jan Freitag, senior vice president at STR. In contrast, the hotel industry added rooms at a rate of 2.2% a year over the last 20 years, he said.

Fewer hotels were built last year because banks were more reluctant to finance hotel construction, he said.

"The limited number of rooms gave the hotels pricing power," Freitag said.

The only double-digit increase in rates for the final week of December — up 11% from a year earlier — was in the San Francisco-San Mateo area, where the average daily rate was $135, according to STR. Los Angeles posted the largest rate decrease, a drop of 2.4%, that left the average daily rate at $119.12.

Hotel rates are expected to climb 3.6% this year as demand continues to grow, according to the study by TravelClick, a New York company that provides booking software and business data for major hotel chains worldwide.

That study listed only percentage forecasts and not daily rates.

The rebound in the hotel industry is being boosted by the continued resurgence of business travel, which generates the lion's share of revenue for large luxury and upper-scale hotels.

"The business-travel segment continues to be strong," said Tim Hart, executive vice president for business intelligence solutions at TravelClick.

For more than three years, hotel rates have been a moving target. They dropped for 18 straight months starting in fall 2008, pushed down by slumping demand during the recession.

Business travel sank as corporations seeking government bailouts and facing massive layoffs slashed travel budgets.

In California, the number of hotels in foreclosure more than doubled in 2010 to 138 properties. Analysts said the increase in foreclosures came about because hotel owners took out expansion and renovation loans in the mid-2000s. When the recession hit and demand dropped, hotel owners had trouble repaying the loans.

Hotel rates started to climb in spring 2010 as Americans started to travel more.

This year, demand should be higher in such cities as Charlotte, N.C.; Detroit; Indianapolis; Houston; and Miami, according to TravelClick. The rates in those cities are expected to climb 3% to 5%.

In California, demand is expected to grow about 5% in Los Angeles and San Diego, and nearly 4% in San Francisco. Meanwhile, the average daily rates are expected to jump nearly 2% in Los Angeles, 1% in San Diego and 11% in San Francisco, according to TravelClick.

hugo.martin@latimes.com

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