The hotel sector of the travel industry has enjoyed a run of rising prices for about half a decade. With an airline industry in distress, hotels seemed to be a bright spot in the travel travel industry, but with the dramatic cutback in airline capacity coming this fall, things are changing.
So far, hotel prices have been holding their own, but a whopping 35 percent of the hotel industry rooms are controlled by corporate contracts and business travelers. The 35 percent of the hotel room reservations that have kept hotel prices propped up are in the process of be renegotiated for 2009. Signs seem to indicate that negotiations are going to be tough for hotels this time around.
A major concern for the hotel sector is its reliance on U.S. airlines, which are slashing routes and capacity as they fight for survival amid unprecedented fuel prices. Oil prices have roughly doubled in the past year.
At least seven small airlines have filed for bankruptcy or stopped operating in recent months. If oil prices do not retreat soon, some analysts believe it is only a matter of time before a major airline files for bankruptcy.
This cutback in airline capacity and the real possibility that corporations will be forced to cut back on corporate travel has hotel chains worried and hotel analysts predicting drops in major hotel stocks.
Hotels no longer hold the upper hand in price negotiations and predictions from this analyst is that we will see prices holding steady for corporations and business travelers and perhaps dropping for the leisure travelers.
Charlie Leocha is the President of Travelers United. He has been working in Washington, DC, for the past 14 years with Congress, the Department of Transportation, and industry stakeholders on travel issues. He was the first consumer representative to the Advisory Committee for Aviation Consumer Protections appointed by the Secretary of Transportation from 2012 through 2018.
