For the first time in recent memory, the average price of a hotel room in New York City is less than $200 a night. Prices are also down in Honolulu, Hawaii, a destination for the kind of lengthy vacations that mainlanders are cutting back on these days.
Across the U.S., the most expensive cities to travel to are also where prices are dropping the most. Where prices are highest, there's more room to drop. And deals have been the order of the day in 2009 as hotel chains battled a rough economy and falling occupancy rates.
Hotels are a lot like houses or airplane seats. Build too many of them during flush times, and you're left with too much capacity. As demand falls off during a recession, prices drop.
The hospitality industry built nearly 400,000 new rooms in the U.S. between 2004 and 2009, according to data from Smith Travel Research, a 9 percent bump over five years. Meanwhile, average occupancy rates dropped to 55 percent last year from 60 percent in 2008.
Falling prices have come mostly from the penthouse or other swanky spots.
"You've got five-star rates getting lowered to compete with the three-and-a-half-star rates," says Scott Booker, a vice president at Hotels.com, an online booking service that provides rooms at 94,000 hotel properties worldwide.
According to Hotels.com's figures, prices paid by travelers for hotel rooms during the latter half of 2009 averaged 12 percent less than they did during the same period a year earlier.
"We haven't seen these kinds of prices since 2003," says Booker, who adds that specials for goodies like free extra nights for three-day bookings have been more rampant than ever during the past year.
The good news for the industry is that price declines are at least showing signs of leveling off. The same comparison six months earlier (for the first half of 2009 vs. 2008) showed a 16 percent spread, meaning year-over-year price changes are narrowing. Consumers should see the recent trend as a warning that the window they've enjoyed for good hotel deals is beginning to close. As businesses begin easing up their travel restrictions, hotel chains won't be resorting to as many special deals to lure guests.
While prices have fallen across the board, even in the high-priced markets, the traditionally expensive cities have retained their perches relative to others. The average room rate in New York City fell to $199 in late 2009 from $262 a year earlier. But the Big Apple still reigns as the most expensive city in which to get a room for the night. It's followed by other historically expensive destinations whose prices have eased off of late: Honolulu ($160; down 12 percent), Boston ($158; down 18 percent), Washington, D.C. ($144; down 11 percent) and Miami ($140; down 14 percent).
The bulk of the most expensive cities have one thing in common: they're coastal locations amid dense populations. That means they're drawing from big pools of weekend travelers opting for a quick road trip getaway in lieu of getting on a plane.
Booker sees prices trending back up in 2010, though not in any mad rush. "We've still got unemployment close to 10 percent," he says. "It will be slow going for most of the year." Still, it'll be a long time before the deals out there are better than they are right now.
