Review of global hotel prices: Summer 2010

13th Sep 2010

The Hotels.com Hotel Price Index™ (HPI®) is a regular survey of hotel prices in major city destinations across the world. The HPI is based on bookings made on Hotels.com and prices shown are those actually paid by customers (rather than advertised rates) in the first half (and particularly Q2) of 2010.

Now in its seventh year, the HPI is respected as the definitive report on hotel prices paid around the world and increasingly used as a reference tool by media, analysts, tourism bodies and academics.

 

• The HPI tracks the real prices paid per room by Hotels.com customers around the world using a weighted average based on the number of rooms sold in each of the markets that Hotels.com operates in.
• Approximately 91,500 properties in more than 15,750 locations make up the sample set of hotels from which prices are taken.

The international scale of Hotels.com (in terms of both customers and destinations) makes the Hotel Price Index one of the most comprehensive benchmarks available, as it incorporates both chain and independent hotels, as well as options such as self-catering and bed and breakfast properties. In Europe, approximately 25% of hotel rooms are part of a chain, the remainder being independent. The reverse is true of the US, in which approximately 70% of hotel rooms booked are in chain properties.

Foreword by David Roche

President of Hotels.com

As I write this foreword there is considerable worry about the fragility of the economic recovery and the possibility of a double-dip recession. Hotel pricing trends, up to the end of Q2 of 2010, confirm that a stabilization has indeed been under way in the hotel industry, and that there are hints of a recovery. Hotel prices appear to have hit the bottom in the first half of 2010, and have lately trended up 2% against the prior year, the first time prices have risen since 2007.

If indeed we’re seeing the beginning of a true recovery, it is an uneven recovery, and one starting from a low base. Prices remain at levels not seen since 2003 or 2004 in much of the developed world – the Asian-Pacific region is the only one to show any significant growth. Business capitals of the world such as New York, London and Singapore are seeing significant price rises again – but this is not mirrored in other capitals (Dublin hotel prices fell 9% and Brussels up barely 2%).

For context, starting in 2008 the major factors acting to lower hotel prices were the recession-led fall off in demand, and the increase in capacity as hoteliers built new rooms in the expectation of continued strong economic conditions. In 2010 the key factors acting to stabilize and even improve hotel pricing are the return of corporate travel (more pronounced in North America than in Europe), the general improvement in macroeconomic conditions and the slowing down of additional new room capacity.

Yet while North America and European hotels are struggling to achieve growth on 2004 prices, the busier Asia-Pacific destinations have already closed the price gaps with 2009, and look set to increase prices still further. Today’s hotel market may have notoriously short forward visibility, but continued price growth in Asia-Pacific seems the safest prediction that could be made today.

Another observable trend has been the rise in domestic tourism, partly due to the pronounced rise in air fares (especially transatlantic fares) and due to currency volatility hitting consumers’ spending power. During the period of our survey, the term “staycation” made it into the Oxford English Dictionary, and the phenomenon meant that it wasn’t just the business capitals who posted rising prices; Edinburgh, Oxford and Bournemouth are all examples of stronger domestic demand edging prices up.

But the hotel business has always been a local business, subject to local commercial currents. For instance, in the second quarter of 2010 Cape Town hotel prices were up 54% year on year thanks to the World Cup 2010, while Reykjavik hotel prices were down 14% (thanks to the Eyjafjallajokull volcano).

What does this mean for the general consumer? While the Hotel Price Index has shown a rise of 2%,consumers should remember that hotel affordability across the world has not been this good since 2004, offering terrific opportunities to extend stays or trade up the star class.

Without willing to sound too urgent an alarm here, the quality of hotel bargains has slipped year over year – as the economy recovers it is just harder to get truly outstanding deals, but consumers shouldn’t worry unduly, after all delivering outstanding deals is just what Hotels.com is for!

In the HPI report, we focus on two main sources of data:

The first section (chapter 1) shows the global Hotel Price Index up to and including Q2 2010.

The Index is compiled from all relevant transactions on Hotels.com, in local currency, weighted to reflect the size of each market. By representing hotel price movements in an index, Hotels.com can illustrate the actual price movements as experienced by consumers without foreign exchange fluctuations distorting the picture.

The Index was started in 2004 at 100, and includes all bookings across all star ratings.

The report largely compares prices paid in the first half of 2010 with prices paid in the same period in 2009, thereby removing the effect of seasonality.

The second section (chapters 2-9) shows hotel prices across the world as paid by UK travellers in Pounds Sterling. This shows the changes in real prices paid by consumers, reflecting both movements in exchange rates and hotel pricing. The prices shown are average prices paid by travellers in the first half of 2010.

The value of Sterling

UK travellers benefitted from relatively favourable Sterling exchange rates against the Euro during Q2 2010, compared to historically poor Euro rates in 2009. However, Sterling did not fare so well against the US Dollar which strengthened during the first half of 2010.

 

Contents

• 1. Global price changes in the first half of 2010
  • Overall
  • By region
• 2. Global city destinations
  • Prices across the world’s top cities
  • Most expensive destinations
  • Highest price rises and falls
• 3. European country comparisons
• 4. Focus on UK cities
• 5. Prices paid at home and away
• 6. Where to go for £100 or £75 per night
• 7. Average room prices by star rating
• 8. Luxury for less
• 9. Travel habits
  • Top UK destinations for UK travellers
  • Top overseas destinations for UK travellers
  • Top UK destinations for travellers from overseas

 

1. Global price changes

Global hotel prices stabilised in the first half of 2010, but after seven consecutive quarters of price falls, were still at levels seen six years ago, according to the latest Hotel Price Index.

The average price of a hotel room rose 2% in the second quarter of 2010, the first rise since the end of 2007.

While prices in all regions were either flat or down year-on-year in the first three months of 2010, by Q2 prices had risen 1% in Europe and the Caribbean, 3% in the Americas and had stabilised in Asia.

European prices start to recover in 2010

• Prices paid by travellers for hotel rooms in Europe rose 1% between Q2 2009 and Q2 2010 (they were flat between Q1 2009 and Q1 2010).
• Prices had fallen for seven consecutive quarters, from Q2 2008 to Q4 2009, so this indication of rates improving will be encouraging for hoteliers.
• The Hotel Price Index for Europe stood at 101 in Q2 2010 as a result of the modest price gains. That means that hotel rooms are now 1% more expensive across Europe than they were in 2004, when the Hotel Price Index was started and 16 points lower than their peak in Q2 2007.

North American prices show modest signs of recovery

• Prices paid by travellers for hotel rooms in North America (the US and Canada) rose 3% between Q2 2009 and Q2 2010. The North America HPI stood at 101 in Q2 2010.
• This was the first quarter in which prices rose (year-on-year) since the end of 2007. Stronger demand, both from domestic and business travellers, has given hoteliers the confidence to hold their prices and maybe start raising rates.
• Prices for hotels in the Caribbean rose by 1% year-on-year in Q2 2010 – again the first signs of rates increasing since the end of 2007. This meant that the Caribbean HPI stood at 100 – a recovery back to the average rate of 2004 and a sign of just how far prices had dropped during the global downturn.
• Prices across Latin America also rose, by 3% in Q2 2010 when looked at on a year-on-year basis. Asia – back to Q2 2009 levels, but with a varying picture across the region
• Prices paid by travellers for hotel rooms in Asia remained stable in Q2 2010 averaging 117 points, the same level as in Q2 2009.
• Overall, Asia’s Index in Q2 2010 stands at 117 points, markedly higher than when the Hotel Price Index was first started in Q1 2004. This is in contrast to every other region of the world where the Index has remained very close to the 2004 level of 100. This reconfirms the general growth in the Asian region and the increased demand for hotels in the region.
• The prices paid in Asia, and their pace of recovery, show clear variations across the region. Large business and convention hubs, like Singapore and Hong Kong, have seen rates go up on the back of returning corporate travel demand.

2. Price changes in global city destinations

This section (and those that follow) reflects the real Pound Sterling (£) prices paid by travellers from the UK during Q2 2010 – compared to prices paid in Pound Sterling a year before.

European culture capitals on the up

In the Western Europe capitals, the overall trend in prices paid for hotels was up. In part this was down to recovery in demand from both leisure and business travellers. It was also in part due to hoteliers offering fewer discounts.

However, travellers should also bear in mind that while prices paid year-on-year have risen, amongst them Frankfurt (up 13%), Paris (by 9%) and Amsterdam (by 7%), they are doing so from record low levels of 12 months ago.

While some of the increases in average prices paid for rooms are in double figures, in many destinations this means that prices are only back to the level a traveller paid in 2004. There are still real bargains to be found for city-breaking travellers.

Prices rise in American cities

For UK travellers, the prices for hotels in the major US city destinations are up year-on-year. Prices in New York were up 8% between Q2 2009 and Q2 2010 and were also up in Washington (by 16%), in Miami (12%), San Francisco (7%) and Los Angeles (3%).

This has been driven by a combination of factors, including recovery in domestic and business demand and the strength of the Dollar. At the same time, US hotels are offering fewer promotions at the top-end of the market. However, there are still remarkable bargains to be found in the US for travellers who shop around.

Price falls in Eastern Europe

There was less good news for Eastern European destinations. Many of the capitals in the region saw prices fall year-on-year. Prices are down in Tallinn (by -12%), Riga (by -7%) and in Budapest (by -9%), for example.

World Cup boost for South Africa

The other destinations worthy of mention here are the South African cities of Johannesburg and Cape Town, where the impact of the World Cup in Q2 2010 can be seen dramatically. Prices in Johannesburg rose 12% (making it one of the five most expensive destinations in the world), while prices in Cape Town rose by some 54% in Q2 2010 when compared to the same period in 2009.

Overall most expensive destinations

• Geneva became the world’s most expensive major city destination for UK travellers in Q2 2010 as prices paid rose 5% to average £155 per night, in large part due to the strength of the Swiss Franc against Sterling.
• Geneva replaced Monte Carlo at the top of the table. Prices in the principality rose by just 2% year-on-year.
• Prices in New York started to show some signs of recovery in Q2 2010, rising 8%, having been at best flat for several quarters. This was in part due to the continued relative weakness of the Pound against the Dollar, but was also a result of stronger domestic demand for rooms in the city.
• Meanwhile, prices in Moscow continued to fall, dropping 9% to £142 per night in Q2 2010.
• As has been noted, there have been some startling rises in prices in some less-familiar destinations in the list of the world’s most expensive cities. Prices in Tel Aviv were up by some 25% and Nairobi saw prices rise 31% year-on-year.
• Also experiencing substantial rises and making their debut in the list of the world’s most expensive cities were South Africa’s two biggest cities Johannesburg and Cape Town – a reflection of the demand for World Cup rooms which helped drive prices up by 12% and 54% respectively year-on-year.

• The sharpest year-on-year hotel price rises for UK travellers came in the non-Euro destinations and not a single Eurozone destination featured in the list of top ten fastest risers for UK travellers in Q2 2010.
• The steepest price rises for UK travellers were seen in Cape Town, mainly due to the World Cup that was hosted in South Africa in June and July.
• Rio de Janeiro also saw prices rise 28% for UK travellers, largely as a result of the strong Brazilian currency.
• Several destinations in North America and Canada also saw large price increases for UK travellers – with Las Vegas (up 27%), Toronto (up 21%) and Orlando (up 20%). A combination of increased demand from domestic and corporate travellers along with the strength of the Dollar fuelled these price rises.

• Abu Dhabi was the city in which prices paid by UK travellers fell furthest according to the Hotels.com Hotel Price Index. The average price for a room in the Emirate dropped by over a third (35%) to £113 in Q2 2010 – a fall of more than £60 per night in the course of just 12 months. This was fuelled by a combination of growth in the number of rooms, as new hotels opened, and a drop in the number of corporate travellers visiting the Emirate, due to the economic downturn.
• Perhaps inevitable given the ash cloud crisis, prices in Reykjavik also fell sharply, down by 14% year-on-year in Q2 2010 to average £77 for UK travellers heading to the Icelandic capital.
• A crop of Eastern European destinations also fell: Tallinn (down 12% year-on-year to average £54 in Q2 2010) and Budapest (down 9% to average £66) feature in the list of top fallers, Riga (down 7%), Krakow (down 4%) and Warsaw (down 1%) also saw prices fall.

3. Price changes across Europe

Switzerland remained the most expensive country in Europe for UK visitors in Q2 2010, while prices in Iceland fell by the most of any European country during Q2 2010 – largely as a result of the ash cloud.

• Across the UK as a whole, hoteliers saw average prices recover somewhat – up 3% between Q2 2009 and Q2 2010 – as the so-called staycation and the gradual recovery in travel had an impact on the prices that travellers were prepared to pay for hotel rooms.
• However, with the average price paid for a room now standing at £83, the country’s position in the table of most-expensive European country destinations is 15th, a far cry from the number one spot it held three years ago.
• With a price rise of 5% year-on-year, the price paid for a Swiss hotel room averaged £130 in Q2 2010 which made it the most expensive European destination for UK travellers. Prices rose in Switzerland as demand for rooms stayed high.

• While during 2009 just four countries across Europe experienced year-on-year price inflation, a much larger crop of nations saw average prices rise in the first six months of 2010.
• Leading the way was Norway, where prices paid by UK travellers rose 12% (to average £120 per room per night) in Q2 2010 when compared with Q2 2009. This was largely due to the strong Norwegian Krone. Prices were also up in the neighbouring Scandinavian country of Sweden where they rose 7% year-on-year.
• Greece saw prices rise 11% in Q2 2010, as UK travellers were tempted to spend more for top end hotels that were offering attractively discounted rates.

• Iceland was the country in which prices fell furthest for Britons – down 15% year-on-year in Q2 2010. The average price of a room in the country dropped to £77, mainly due to the ash cloud.
• Average prices for Russian hotels also dropped substantially. Prices were down in major destinations Moscow and St Petersburg, a trend reflected across the country as prices overall fell 11% to average £127.

4. Focus on UK cities

There was a mixed picture across the UK’s hotels in Q2 2010.

While, on average, the prices paid by travellers for UK hotels rose 3% in Q2 2010 when compared to Q2 2009 (to £83 per night), this overall result masks some dramatic ups and downs across the country’s major cities.

Among the 40 cities from across the British Isles in the table below, 25 saw prices rise while prices were flat in five and fell in the remaining ten.

It is notable that many of the major tourist cities saw the highest percentage price rises – perhaps a reflection of impact of the so-called “staycation” trend across the country.

Prices in the most expensive city destination, Bath, remained unchanged year-on-year in Q2 2010. It held its spot as the country’s most expensive city averaging £111 per night for rooms. Bath remains a popular tourist destination and has a limited number of hotels, ensuring that rates stay fairly high. Prices in London showed strong signs of recovery. The average price paid for a room in the capital rose 9% to £110 between Q2 2009 and Q2 2010.

Prices in the Jersey capital of St. Helier saw the steepest rises across the British Isles – up by a fifth (20%) to stand at £102 per night. The rise comes as a result of a greater number of domestic travellers staying closer to home and experiencing “Europe without the Euro” for their breaks.

Other notable rises include those seen in Southampton (up 17% to £67), Oxford (up 12% to £98), Stratford-upon-Avon (up 10% to £92) and Bournemouth (up 8% to £71).

At the other end of the scale, Durham was the city in which prices fell most sharply between Q2 2009 and Q2 2010. They were down 17% to just £67 per night. The Welsh cities of Cardiff and Swansea also saw prices drop sharply – down 8% in both cases to £76 and £72, respectively.

• Prices in Edinburgh showed signs of recovery in Q2 2010, up by 8% on Q2 2009 to average £98 per night. The rallying in prices was accentuated by a sequence of events during Q2 2010 including the city’s marathon, Rugby tournament and Royal Highland Show.
• The average prices paid in Inverness (up 11% to £73 per night) and Dundee (up 5% to £68 per night) were also up. There has been a notable increase in demand from travellers heading to the Scottish Highlands which has impacted Inverness positively.
• However, it was not all good news for Scottish destinations. Prices dropped in Stirling (down 6% year-on-year in Q2 2010 to average £76 per night), Aberdeen (down 5% to £75 per night) and Glasgow (down 3% to £70 per night).
• In Aberdeen, increased supply has had a downward effect on rates as hotels try and sustain occupancy. Price falls in Glasgow, meanwhile, were the result of a fall in conference business at hotels and therefore lower business bookings.

5. Prices paid at home and away

US travellers are the biggest spenders when they travel abroad, according to the Hotels.com Hotel Price Index. They spend on average £105 when they head overseas according to the report. Travellers from the US are followed by those from Russia and Japan, who spend £103 per night on hotels.

At the other end of the scale, travellers from Mexico are those who spend the least when travelling outside their own borders, parting with just £80 per night for hotel rooms, according to the report.

UK travellers spend on average £95 per night on a room when overseas, putting them eighth in the table of biggest spending travellers when journeying abroad. However, the report also shows that UK travellers spend substantially less when travelling within their own country, parting with just £83 per night for hotel rooms domestically.

6. Where to go for £100 or £75 per night

Travellers with £100 or £75 to spend on their hotel room have a reasonable selection to choose from when it comes to finding luxury for less. In the basket of cities analysed, six destinations now offer five-star hotel rooms for less than £100 per night.

Those searching for a luxury break in Europe can find accommodation at the top of the range in cities including Budapest, Lisbon, Tallinn and Warsaw. Those travelling further afield can find luxury for less in Buenos Aires or Marrakech.

7. Average room prices by star rating

Hotels.com analysed the average prices paid for hotel rooms across different star ratings in the world’s top cities.

The data demonstrates where UK travellers can find the best value. It also shows those cities where shopping around for the best deal can yield dividends: in some cases, travellers can end up paying more for a property with a lower star rating.

8. Luxury for less

The falling cost of luxury

As well as looking at the star rating they can get for £100, travellers should also be aware that, within certain star bands, there is some great value to be found.

For example, the average price paid for rooms in four-star hotels in Cairo and Mumbai fell by a fifth (20%) between Q2 2009 and Q2 2010, making luxury in these cities a far more attractive proposition for travellers.

Those looking for the high life but wanting to spend substantially less than they might have done a year ago should look no further than the Hotels.com HPI guide to “Luxury for Less” in the table below which shows where in the world four-star and five-star hotel prices have fallen the most.

Where to go for affordable five-star luxury

9. Travel habits

Top UK destinations for UK travellers

London was the most popular domestic destination with UK travellers according to the Hotels.com Hotel Price Index.

Edinburgh came in at number two on the list with Manchester in third place. Glasgow and Birmingham made up the remainder of the top-five most popular domestic destinations for UK travellers.

Top overseas destinations for UK travellers

New York was the most popular overseas destination for UK travellers in Q2 2010. In fact, there are four US cities in the top-20 list, with Las Vegas, San Francisco and Orlando all in the table.

Paris was the third most popular overseas destination and top European city for UK travellers. However, the top European city-break destinations then dominate the table, with Dublin, Rome, Amsterdam and Barcelona making up the next four spots.

Other destinations to feature include the Far East cities of Hong Kong, Bangkok and Singapore. The continuing appeal of Eastern European city breaks is also evident in the top-20, with Krakow and Prague both featuring in the table.

Top UK destinations for travellers from overseas

The top destinations for overseas travellers are fairly predictable with London, Edinburgh, Manchester, Glasgow and Liverpool all featuring.

 

About Hotels.com

Hotels.com is a leading online accommodation booking website with over 150,000 properties around the world, ranging from international chains and all-inclusive resorts to local favourites and bed & breakfasts, together with all the information needed to book the perfect stay. Hotels.com benefits from one of the largest hotel contracting teams in the industry, negotiating the best rates for its customers, and offers frequent sales, special deals and promotions. Regular customer e-newsletters provide exclusive offers and advance warning of up-coming sales. There are more than 6.5 million reviews on the site from users who have actually stayed in the hotels to ensure customers can make an informed choice when booking. Through its industry-leading loyalty program Welcome Rewards, customers can earn a free night for every 10 nights stayed at more than 65,000 hotels. Under its Price Match Guarantee, if a customer can find the same deal for less on a prepaid hotel, Hotels.com will refund the difference. Travellers can book online or by contacting one of the multilingual call centres. Special apps for mobile phones and tablets can also be downloaded at www.hotels.com/deals/mobile_app/ enabling customers to book on the go with access to 20,000 last minute deals. For the last eight years, Hotels.com has published an award-winning twice-yearly review of international hotel room price trends called the Hotels.com Hotel Price Index which is now produced in 31 individual country editions www.hotelpriceindex.co.uk Follow Hotels.com on Facebook at facebook.com/hotelsdotcomuk, on Twitter at @HotelsdotcomUK and download the mobile app at www.hotels.com/deals/mobile. Hotels.com is part of Expedia Inc., the largest online travel company in the world with an extensive portfolio that includes some of the world's best-known brands.

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