Shortage of rooms is sending hotel rates through the roof

David Kaufman published an interesting article in the New York Times today about the soaring cost of hotel rooms due to an overall shortage of rooms. The article highlights that:

  • NYC's hotel room rates rose 15.4% last year with average room rates at a blistering $320.87/night
  • In 2008, hotel rates are expected to rise by 5 - 8% in the U.S. and 12 - 14% in Europe
  • Room rate increases upwards of 35% year-over-year have been observed from India to London to Dubai

[Correction: David's original article was published on January 20, 2008 in the New York Times]

* Click here to read David's Full article republished today on Boston.com

The Times article highlights an opportunity for the vacation rental industry to promote its product as a strong alternative for guests that typically would have chosen to stay in a hotel room, but are being deterred by rising room rates. The combination of higher hotel rates with a faltering economy will likely deter travelers from traditional accommodations prompting the search for alternative vacation plans.

How rising hotel rates benefit the vacation rental market:

  • With rising room rates across all lodging categories, vacation rental managers can increase nightly rates while maintaining a competitive and often a more economical alternative for consumers
  • Depending on geography, managers can target aggressive 'shoulder season' campaigns and promotions to lure cash conscience travelers from traditional accommodations
  • Opportunity to expand vacation rentals beyond family destinations. Over occupancy in urban markets such as NYC, San Francisco , Boston and Chicago signal an opportunity for services to expand into city centers. (FlipKey has personal experience with managing vacation rentals in downtown Boston and can confirm that demand far exceeds supply in the downtown area - during all seasons)

The Times article sees the same opportunity for the vacation rental market and even provided a short plug:


Although they will be much harder to secure in 2008, savings will be available even in the highest-cost destinations for travelers willing to work for them. Henry H. Harteveldt, travel analyst with Forrester Research in San Francisco, suggested opting for apartments instead of hotels for stays longer than four days or for small groups. "They are far more economical and can feel much more like home," said Harteveldt, who suggested using websites such as Condo.com . "This is something I actually did on a recent visit to New York."

Our industry often focuses on competition between property managers and local rent-by-owners; however, its hotels that typically act as the primary competitive lodging alternative for many key markets. Rising hotel room and occupancy rates signals an immediate opportunity for the vacation rental industry to effectively promote itself as a mainstream lodging option.

FlipKey looks forward to working with active associations, local cambers of commerce and popular media channels to help promote the vacation rental category. The time is now!

7 COMMENTS

  1. Apartment Bed and Breakfast chalet near Innsbruck in Tyrol Austria
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  2. Great write up. We (The Society) are closely tied to the luxury vacation rental market and we would concur that our competition is often The Ritz, Fairmont, and others of the sort.

    That being said, in light of your article, these hotels and resorts have some sophisticated yield management tools that enable price increases and decreases to match the demand.

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