Finding a great hotel deal can be harder than ever before.
Hotel prices are “all-time high,” Alan Watts, Hilton’s Asia-Pacific president, told Squawk Box Asia on Thursday.
Tariffs are fueled by demand for travel that is like “a feast… to offset the famine,” he said, referring to the pandemic.
According to earnings reports, Hilton’s average daily rates increased 8% in the fourth quarter of 2022 compared to the same period in 2019. Similarly, Marriott and IHG increased prices by 13%, while Hyatt had a 14% daily rate increase.
That’s worldwide. In parts of Asia Pacific, hotel prices are rising even higher.
Rates in Asia are skyrocketing
The travel boom in Asia-Pacific is “phenomenal,” Watts said.
Data shows that this is especially the case in places where Chinese travelers go.
According to data from travel booking company Traveloka, average hotel prices in Southeast Asia have increased by more than 10% since 2022.
But fares are up more than 45% in destinations that attract the most Chinese travelers, said the company’s chief strategy officer Joydeep Chakraborty.
“The most significant increase was recorded in Bali, Bangkok, Phuket and Singapore, with Bangkok topping the charts by more than 70% and Singapore by more than 40%,” he said.
Ctrip, the leading travel booking website in China, also told CNBC that average hotel booking prices in Bangkok increased by about 70% at the end of January.
Increases highest at luxury hotels
Traveloka’s data shows that hotel rate increases are not limited to the luxury sphere “but are more important among the high-end hotels,” Chakraborty said.
Data shows a growing demand for luxury hotels among Chinese travelers. A report published by Morgan Stanley on February 7 showed that Chinese travelers’ interest in luxury hotel stays increased from 18% to 34% between 2022 and 2023.
A report provided to CNBC by data identity firm Adara in late February found that Chinese travelers are spending significantly more on hotel rooms. Fewer travelers booked rooms under $100 a night, while the number of people booking rooms costing $400 or more nearly tripled, as seen here:
In addition, international travel is largely limited to those who can afford airline tickets that have doubled or even tripled in price. China’s surprise reopening announcement — timed as Covid infections surged across the country — failed to prompt airlines to increase flight connectivity to China to meet outbound demand.
The result was limited seating and sky-high rates. For a round-trip flight between San Francisco and Shanghai in March, United Airlines charged nearly $4,000 in economy class and more than $18,000 in business class, according to Reuters.
A fleeting return to normality?
But there is also evidence that high hotel rates may be short-lived — or perhaps follow an undulating path of sporadic rises and falls — as the Asia-Pacific travel industry attempts to return to normal.
Hotel prices across the region are on the rise, according to booking platform Kayak, but some of the highest average hotel prices have already started to fall.
It should come as no surprise to see an increase in luxury hotel prices following the reopening of mainland China.
chief economist, Mastercard Economics Institute
The booking site found that average nightly hotel rates in Bangkok fell by 36% from January to February, and by about 33% in Singapore.
But when comparing the same two months, average nightly rates rose 70% in Hong Kong and 73% in Tokyo, the company said.
This could indicate that “general demand” could drive costs up, a Kayak spokesperson told CNBC.
Good for hotels, hard for travelers
Price hikes are helping hotels recoup substantial losses from the past three years and have the potential to “stimulate further growth,” according to Traveloka’s Chakraborty.
But what hotels consider “growth” travelers may see as yet another blow to wallets already wracked by rising costs of living and inflation.
But double-digit price hikes may not deter Chinese travelers, who aren’t pressured by the same market forces. Inflation in China has remained relatively contained compared to the West, with consumer price inflation expected to be only modestly higher by the end of the year than the year-on-year average of 2% between 2013 and 2019, according to a post on Mastercard Data & Services last month, written by economists David Mann and Anushri Bansal.
“It should not be surprising to see an increase in luxury hotel prices following the reopening of mainland China to international travel, given its pre-pandemic role as the largest source of outbound tourism spending globally,” Mann, the chief economist of Mastercard Economics Institute, told CNBC, “Especially for economies that rely on tourism, like Thailand.”
He and Bansal compared Asia-Pacific’s current status — as it attempts to recover in the face of China’s “relatively sudden, if expected, easing of Covid restrictions” — to the period after a bungee jumper hit the bottom of the fall. has reached, and begins to travel upwards again.
They wrote, “After an initial rebound, a bungee jumper enters a disorienting bounce phase when it is unclear whether the trajectory is groundward or skyward.”
– CNBC’s Charmaine Jacob contributed to this report.