Caution for Planners: Hotel Rates Set to Rise in 2024

Woman sitting in hotel lobby

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Hotel rates will rise globally in most locations next year, something to keep in mind when negotiating meeting contracts.

Hotel rates will rise by as much as 17.5% in some cities next year, according to the 2024 edition of Hotel Monitor published by American Express Global Business Travel (Amex GBT), which focuses on more than 80 cities globally. One of the reasons for this is the softening demand for leisure travel.

In top-volume convention cities like Las Vegas, Chicago, Madrid, London, and Orlando, as large citywides return, they take room inventory, leading to higher rates. “As availability goes down, prices go up,” said Linda McNairy, global vice president of strategic meetings at American Express Meetings & Events,

Meetings Being Planned With Short Lead Times

It is taking longer for organizations to get the go-ahead for meetings, which means shorter lead times, impacting budgets, she explains. “The sooner you get approval and can start sourcing the meeting, the better,” she said. “We are evangelizing this message that it is incumbent on program owners to educate business owners about today’s reality and that lead times impact their budget.”

Labor, energy, and food are predicted to increase in cost, also impacting rates. Supply is also an issue in many locations due to permanent closures, ongoing staffing shortages, and labor issues. Another impact is hotel wages in the U.S., reaching record levels in 2023.

This rising cost base is disrupting the traditional relationship between supply and demand within the hotel industry, and hotel operators are increasingly limiting inventory to respond to staffing shortages, reduce overhead, and protect rates. In practice, this means traveling off-peak may no longer deliver previously available levels of savings as the link between rates and occupancy weakens.

Blended travel is also making an impact, as when business travelers take advantage of being in a destination by extending, there are fewer available rooms. “Many properties are catering to that business, and it impacts inventory available for groups,” adds McNairy.

Regional Events and Trends Will Impact Hotel Rates

Major sports and cultural events influence room rates as well. In 2024, predictions state that 16 million people will attend the Summer Olympics in Paris, with forecasts calling for an 11% price increase rolling over to the shoulder period. “Rates are dependent on whether there is inventory,” said McNairy.

The most significant increase in hotel rates is predicted to be in Buenos Aires, Argentina, at 17.5%. The second-highest rate increase will be in Mumbai, India, at 15%, followed by 14.6% in Cairo, 14.6% in Chennai, India, and 14.1% in Bogota, Colombia. 

Cities With the Highest Predicted Hotel Rate Increase

  1. Buenos Aires, Argentina: 17.5%
  2. Mumbai, India: 15%
  3. Cairo, Egypt: 14.6%
  4. Chennai, India: 14.6%
  5. Bogotá, Colombia: 14.1%
  6. Chicago, U.S.: 12.6%
  7. Delhi, India: 12%
  8. Paris, France: 11%
  9. Boston, U.S.: 11.3%
  10. Jakarta, Indonesia: 10.9%

Various factors are impacting rate increases in each city. Buenos Aires, for instance, is undergoing tremendous inflation, fueling the rise in rates.

According to the study, Australasia will experience moderate increases as inbound visitor numbers to Australia and New Zealand have rebounded sharply, and there have been new hotel openings. 

How Can These Increases be Combatted?

What can meeting planners do? The anticipated changes in leisure travel open the door for corporations to negotiate better deals with hotel partners for 2024. Concentrating spending on a smaller number of providers will help secure better rates, improved terms, and other amenities, even for smaller businesses. McNairy stresses the power of partnerships. “Leverage relationships with national sales offices,” she said. 

Flexibility is vital, too. “Come to the table to talk about your needs with the ability to be flexible. Explain what you are trying to achieve with the meeting and if you are open to another property that can deliver a similar experience at a better value in a different location. Know your non-negotiables and what you can be flexible with,” said McNairy. 

With the rise in hotel rates, it is no surprise that meeting groups are spending more. Survey data from hospitality group Accor points to more than three-quarters of planners (78%) are spending more on hotels in 2023 compared to the previous year. More than one-third (36%) increased spending by more than 25%. The trend is set to continue into 2024, with 80% expecting increased spending in 2024 but only 30% saying their spending would rise by more than 25%.

More Expensive Than Ever to Run a Hotel

Real Hospitality Group manages more than 15,000 hotel rooms across more than 100 hotel properties. “It has become increasingly expensive to operate a hotel,” said Judy Wilbur, regional director of sales at Real Hospitality Group.

Wilbur attributes the increase in hotel running costs to the rising costs of insurance rates, attracting and maintaining talent, and managing an online presence.

“The dialogue between planners and hoteliers becomes more important than ever to uncover meaningful value for the customer,” Wilbur said.

Photo credit: StockSnap / Pixabay