A new report from American Express Global Business Travel (Amex GBT) predicts that hotel rates will rise across the board in 2023. That should surprise nobody, given high inflation rates around the world and the continued pent-up demand for travel in this third year of the Covid-19 pandemic.
Yet the rate of hotel price increases will differ dramatically from destination to destination, say the report’s authors. Hotel rates — like airfare and pretty much everything else — are largely based on supply and demand. Due in part to the ongoing skills and labor shortage, room supply is not keeping up with pent-up demand.
Here are the cities where hotel rates will jump the most next year.
Buenos Aires: Hotel Prices to Rise by 30%
The report’s standout destination — and not in a good way — is Buenos Aires, where hotel rates will jump by a whopping 30%, according to the Amex report.
Think inflation is bad in the United States? “Analysts polled in August 2022 by the Central Bank of Argentina expect the country’s inflation to reach 90.2% in 2022, up 16.2 percentage points from July forecast,” according to the report. Given that context, a 30% jump in hotel rates does not seem so far-fetched.
Paris: Hotel Prices to Rise by 10%
The City of Light’s tourism bureau estimates that 33 million people will visit Paris in 2023 — 14% down from 2019 visitor levels. Paris hoteliers spent the pandemic renovating and upgrading, and the city is seeing a wave of high-profile property openings.
“While inflation may soften leisure demand into 2023, rising costs, the improved quality of the city’s hotel inventory, and events including the Rugby World Cup and preparations for the Paris 2024 Summer Olympics, could see prices increase by 10%,” concludes Amex GBT.
Stockholm: Hotel Prices to Rise by 9%
Stockholm’s hotel industry is particularly reliant on business travel, and Amex GBT has seen an upswing in demand for meetings and events, but capacity has been limited. “Travelers are having to book higher category rooms or double rooms to get into their preferred hotels,” notes the report.
Dublin: Hotel Prices to Rise by 8.5%
2022 has been a good year for Dublin hotels, which have achieved some of the highest occupancy rates in Europe — sometimes exceeding 90%. Both the country’s tourism organization, Failte Ireland, and the hotel analytics firm STR expect room nights by volume to recover to pre-pandemic levels next year. That demand, coupled with an ongoing undersupply of hotel rooms and rising costs for energy, labor and food, are expected to drive prices upward.
New York City: Hotel Prices to Rise by 8.2%
In the United States, New York City hotels will see the biggest price bump, and it is in step with the country’s current 8.3% inflation rate.
Leisure travel to New York City has rebounded, with occupancy rates reaching 87% of pre-Covid levels, the highest of any US tourism destination. But the more lucrative business travel sector is 55% below 2019 levels. Amex GBT expects this number to rise with the return of in-person meetings and events.
Sao Paolo: Hotel Prices to Rise by 7.7%
Brazil has experienced double-digit inflation for the past year, and hotels in the country’s business and financial capital are feeling that pressure. Add in the return of pent-up demand for in-person meetings and events, and Sao Paolo hotel prices are forecast to rise by 7.7% in 2023.
Seattle: Hotel Prices to Rise by 7.5%
Seattle hotel rates have been rising for years, but that has not dampened demand. The average room occupancy reached 71.9% in Q2 2022, only a couple of percentage points below the city’s pre-pandemic norm. The arrival of new hotel inventory this year and in 2023 should help moderate price rises.
Amsterdam: Hotel Prices to Rise by 7.5%
In 2022, visits to Amsterdam quadrupled in the first five months of the year compared to the same period last year. In addition, RevPAR (revenue per available room, a key industry metric) was almost back to 2019 levels in May and June.
Demand from leisure travelers for economy midscale hotel rooms has pushed business travelers into higher, and more expensive, price tiers, notes Amex GBT. “With inflationary pressures rising (in July, the Netherlands experienced double digit inflation for the first time since the 1970s) hotels will likely aim to pass costs to corporate travelers,” say the report’s authors.
Frankfurt: Hotel Prices to Rise by 7.5%
Since Germany eased Covid-19 travel restrictions later than many European countries, Amex GBT reasons that the next 12 months could see pent-up demand for conferences and trade shows flowing into Frankfurt. The city’s hotels have experienced two years of low occupancy and rising operational costs. “As demand returns, it is likely hoteliers will raise prices to defend margin,” predict the report’s authors.
San Francisco: Hotel Prices to Rise by 7.3%
Corporate demand is recovering slowly in San Francisco, with hotel business travel revenue in 2022 down a massive 68.8% compared to 2019. “With firm demand for in-person meetings driving demand, hotel prices are forecast to rise by 7.3% in 2023,” says Amex GBT.
Bargain Destinations in 2023
When it comes to hotel value, it’s all relative.
Next year, the Asia Pacific region will see some of the lowest hotel price increases in the world, predicts the Amex GBT report. Hotel prices in Sydney and Melbourne are expected to rise next year by 4.3% and 1.2%, respectively, while Hong Kong hotel rates will inch up by only 1.2%.
In Europe, London looks like a downright reasonable choice, with a 6.2% hotel price hike predicted in England’s capital in comparison to Paris’s 10% jump. Over the spring and summer, London’s hotels recorded the highest room rates on record, with absolute occupancy the highest since July 2019. But London has one of Europe’s strongest hotel construction pipelines, which Amex GBT thinks will help curb hotel price inflation.
In the United States, Chicago emerges in the report as a relative bargain, with hotel rates predicted to rise by just 4.5% next year.