Warning of impact of high US hotel rates

European hotel prices fell 8.7% in 2005, with bargains to be found compared to rest of world, a survey out today shows

Room prices in Europe fell sharply in the last quarter of 2005, according to
the Hotel Price Index (HPI), a new measure of hotel prices from online firm Hotels.com. 

The HPI for Q4 2005 fell to 104, down from 111 at the end of 2004 (from a base of 100 when it began in January 2004).

The HPI is based on prices for 20,000 hotels across 1,000 locations and is
based on the prices paid by customers – rather than simply advertised rates. 

The falls hide substantial changes in prices across the world. In Europe prices fell by 8.7% year-on-year (the European HPI falling to 95 in Q4 2005). 

In the US, hotel prices rose by 2.3% to take the USA HPI to 131 following two years of sustained rapid rises. Prices for rest of the world showed the highest year-on-year growth at 4.6%, taking the RoW HPI to 115.

EMEA managing director David Roche said: “European prices took a tumble in 2005, so we will watch with interest whether they recover in 2006 – and whether spring city-breakers push prices up as they have in previous years. 

“Meanwhile, we will also see whether the Americas can sustain the price increases we saw in 2005 – or whether prices have now topped out and falling demand will force them to come down once again.”

These falling hotel prices have meant that there are bargains to be found, according to the HPI:

*Budapest became the cheapest city for tourists during 2005, with average room prices falling 13% to an average of just £60 per night. 

Risers and fallers: how hotel prices changed in 2005:

*Stockholm saw the greatest price fall with prices plummeting 24% to stand at £83 by the end of the year.

*At the other end of the scale, prices in New York rose 13% in 2005, making it the most expensive global destination as average prices rose to £160 a night across all star ratings. The rise was likely due in part to the weak dollar and keen pre-Christmas bargain hunters driving prices up.

*Geneva recorded the highest price rise for any single city with prices up 14% in 2005 – a likely result of increased low-cost airline services during the year.

Roche said: “While price falls tend to have many causes, whether shortfalls in demand, currency fluctuations or the addition of new supply that markets can’t easily absorb, it’s clear that the consumer is the winner here.

“As the data show, consumers willing to be a little more adventurous in their choice of city break can find their money will often go further. And if US
prices continue to rise, hoteliers there may well find that Europeans holiday closer to home in 2006, with knock-on effects for transatlantic air capacity
and US destination services companies.”

Report by Phil Davies