Hotel Room Rates Show Sharper Increase Than Government Data Suggests

Asoka Elon

Hotel room rates are rising quickly, so quickly in fact that the increased pace is being understated in official government data, most notably in the monthly year-over-year price change series for “accommodations away from home” issued by the Bureau of Labor Statistics.

In March, the average monthly increase according to the BLS data was 25%. But hotel average daily rates, or ADR, grew by 37% according to STR, CoStar’s hotel analytics firm. One reason for the difference is that the BLS sample of accommodation facilities includes a wider group than just hotels and includes short-term accommodations. AirDNA, a data provider that tracks short-term rental space outside the hotel sector, provided monthly revenue and rate estimates for this analysis.

Charting the STR, BLS and AirDNA data separately shows the variation in room rates that hotel operators experienced. While room rates declined 44% at their trough in April 2020, short-term rental rates went up 3% in the same month. This directional difference can be explained by U.S. leisure consumers shying away from hotels, and their lobbies and elevators, and instead choosing accommodations where they were the only guest. Short-term rental rates never contracted through the pandemic and have increased since early 2020.

Hotel operators experienced significant room rate declines between March 2020 and March 2021 but have since realized pricing power, especially higher-end properties, as leisure travelers took advantage of pent-up vacation time and savings. The sharpest rise in monthly ADR was 52% in April 2021 and changes have been in the double digits ever since. The BLS data shows more muted swings since it includes data for more than just hotels.

When combining the AirDNA and the STR data, a more complete picture emerges that approximates the data released by the government. The sharp swings in hotel performance are muted by the steadier increases in short-term rental accommodations, which evens out the more volatile hotel room data.

As U.S. leisure travelers took to the roads and beaches in 2021 and 2022, room rate increases realized by hotels were much stronger than for short-term rentals. In combining the two, the BLS data understated the hotel room rate increases while overstating the short-term rental price increase.

In coming months, the room rate growth at hotels should moderate as the monthly comparable gets less extreme. When that occurs, it is likely that the government data will once again more closely reflect the trends seen in the sets of STR and AirDNA data, as was the case prior to the pandemic.

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