‘Life is Short’ Mantra Drives U.S. Hotel Prices to Record Highs

By Patrick Clark and Claire Ballentine

American travelers are raring to go, and rising hotel prices aren’t stopping them.

For evidence, see what Miami hotels are demanding on the weekend in early May when the Formula 1 racing series comes to town: The 1 South Beach is requiring four-night minimums at just under $4,000 a night, while the Hampton Inn in the city’s Brickell neighborhood is charging more than $400 a night.

Photo by Polina Tankilevitch: https://www.pexels.com/photo/man-and-woman-having-breakfast-on-bed-6429518/

Vacationers, flush with cash and eager to hit the road after two years of pandemic living, are paying up at resorts, roadside hotels and even urban properties – at least in cities with tourism appeal. Those free-spending consumers are filling hotels on weekends, making up for the  lack corporate travelers, who typically book rooms during the workweek.   

“The pandemic has reminded people that life is short,” said Jan Freitag, senior vice president at lodging analytics company STR. “They want to splurge, and they have a lot of pent-up savings. If a market has a leisure appeal, then the hotels in that market are doing well.”

Rising prices aren’t scaring off leisure travelers. The average daily hotel rate rose to $149.38 last week, according to STR. That was the third-highest mark ever, behind the week ending March 19 and the week after Christmas in 2021. 

Jordan Weede, a 30-year-old from Atlanta, recently booked three nights at a hotel in New Orleans for $2,000. The University of North Carolina basketball fan surprised his dad with tickets to the Final Four on Saturday, when the Tar Heels will take on rival Duke.

The semifinals of the college basketball tournament will be played in a packed arena for the first time since 2019, and fans embracing the moment have been paying up to be there.

“I didn’t spare any expense,” Weede said. “I’d rather spend the money on experiences.”

The return of in-person events is welcome news for U.S. hotels, which have divided into two pools for most of the pandemic. Beach resorts, roadside hotels and other properties positioned to tap into appetite for road trip vacations commanded top rates, especially on weekends. On the other hand, lodging markets that depend on large conventions or corporate travel have suffered.

But even big-city hotels are benefiting from consumers who are ready to spend. The combination of staycations, regional visitors and even a bit of business travel have allowed Standard International to raise prices at its two New York hotels. While some operating expenses are also rising, those increases aren’t directly responsible for higher room rates, Chief Executive Officer Amber Asher said. 

“We’re not raising rates because of labor costs,” said Asher. “It’s really just demand driven.” 

Hotels still face plenty of challenges, including sluggish corporate travel. Some travelers will burn through their savings and stop splurging on vacations. Others may start looking abroad as international trips get easier.

Host Hotels & Resorts Inc., which owns the 1 South Beach, sees leisure demand holding steady through the end of 2022. While some guests may eventually start looking abroad, it should also get easier for foreign travelers to come to the U.S. In the meantime, the company has had no problem raising room rates, CEO James Risoleo said in February.

“We have had no push back from consumers,” Risoleo said.

More stories like this are available on bloomberg.com.

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