Shortage of rooms is sending hotel rates through the roof

February 20, 2008|David Kaufman, New York Times New Service

As if the sagging dollar and soaring oil costs weren't enough to dent travel budgets, hotel room rates are expected to surge in the coming year. From New York to Asia, and just about every desirable destination in between, the prices of rooms - especially at hotels and resorts favored by luxury and business travelers - are expected to rise significantly, sometimes in the double digits, analysts say.

A shortage of rooms is to blame. "Supply is simply not keeping up with demand," said Jan D. Freitag, vice president for global development at Smith Travel Research in Nashville. "So hotels can - and do - command premiums for any rooms they can sell."

While the situation is acute in traditional high-cost cities such as New York - where room rates rose 15.4 percent last year to an average of $320.87, according to a recent American Express report - some of the strongest gains are in Asia.

In India, an increasingly popular tourist destination, hotel room rates are up 48 percent this year nationwide and a whopping 69 percent in its commercial capital of Mumbai, according to a recent Smith Travel report. India has only about 100,000 hotel rooms nationwide, roughly the same number as in New York City, though India has seven or eight times the number of tourists. As a result, hotel rates in India will continue to grow in 2008. An increase of "up to 35 and even 40 percent in the coming year," would not be unrealistic, said Priscilla Campbell, an analyst for American Express Business Travel, "especially at upper-tier properties in major gateways such as New Delhi and Mumbai." In Mumbai, a long-awaited 231-room Four Seasons Hotel, in the vanguard of a hotel building boom that should help alleviate the shortage, opens later this winter.

Costs in China - not surprisingly - are expected to surge because of the Summer Olympic Games, both in their host city of Beijing and in other cities such as Shanghai and Hong Kong. Double-digit increases should be anticipated in these cities in 2008 - on top of increases in 2007 that reached nearly 15 percent in Hong Kong and between 5 percent and 7 percent in Shanghai and Beijing, according to Smith Travel. Rates are likely to stabilize somewhat later this year, thanks to a huge number of new rooms, including 14,000 in Beijing alone by summer. "There should be a post-Olympic lull," said Smith Travel's Freitag. He suggested looking for fall deals.

The rest of Asia is on the rise. Vietnam, for instance, is contending with circumstances similar to India's: surging interest from leisure and business travelers, a scarce supply of top-tier hotel rooms and new projects still years from completion. As a result, hotel rates were up some 40 percent last year, according to Smith Travel, while rooms in nearby Singapore rose 36 percent.