Travel industry leaders expect rising hotel room prices to ease in 2024

Tourism executives say ending pent-up demand for travel after the pandemic, combined with more hotel rooms coming online, could help travelers avoid accommodation price hikes as peak travel season approaches.

Tourism office leaders at several northern Michigan tourist hotspots all say they expect hotel rates to stabilize in the wake of the pandemic, which led to rapid price increases when demand soared in arrow.

“I would say we’re probably at a level (with rates) that will remain stable for a while,” said Jim Powell, the association’s executive director. Petoskey Area Visitors Bureau. “I don’t see a big jump this summer. I don’t see him falling. I think they’re in this fine-tuning phase because we’ve been growing really fast there (during the pandemic). I think each property looks at their numbers individually and says, “OK, maybe we went a little too high here.” Maybe we’re a little too low here.

Trevor Tkach, president and CEO of Traverse City Tourism, also said he doesn’t expect big fare increases this year, although it may be difficult to tell when consumers end up changing fares.

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“You don’t always know the tipping point until you reach it,” he said. “The reality is I don’t think we’ve raised our rates faster than anyone else. We were already a premium priced destination and so we maintained that. … But the consumer holds all the cards. If confidence changes at some point over the summer, and it could, we’ll see what the reaction (in terms of hotel rates) might be.”

At the Pure Michigan Governor’s Tourism Conference last month in Kalamazoo, one of the themes was the expected stabilization of local and regional travel spending after pent-up demand peaked post-pandemic and inflation started hitting wallets.

“I think the headline for Michigan’s impending summer season is that the ridiculously named ‘revenge travel’ period is dead,” said Justin Winslow, president and CEO of the Michigan Restaurant & Lodging Association. “In its wake, we find something closer to what we saw before the pandemic, namely modest, if uneven, growth. »

Kelly Wolgamott, interim vice president of the state tourism office Travel Michigan within the Michigan Economic Development Corp., echoed that observation.

“There are a lot of disruptive factors when we talk about consumer trends,” she said. “There are inflationary pressures, so people only have a limited amount of money to travel, and what we call the ‘revenge traveler’ after the pandemic started to ease last year.”

When inflationary pressures reduce local and regional travel budgets, Michigan experiences a decline in visitation, Wolgamott said, which, based on the law of supply and demand, can lead to lower travel rates. bedrooms. While this is good for visitors, it is not good for hotels, whose expenses are now higher due to the rising cost of goods and labor.

“It (poses) a challenge for us, as to how we can achieve this considerable outreach, not only in the United States, but also internationally,” Wolgamott said, particularly with fewer ad dollars for Pure Michigan in the proposed 2024-25 state budget than tourism officials were hoping for this year.

“International tourists are extremely important to the state,” Wolgamott added. “They stay longer, they spend more money, and we are the perfect product compared to New York, Los Angeles and Florida, which are very, very high in terms of price, and Michigan is the best opportunity to value for money for these international travelers. So we are working hard with our partners to attract international travelers here.

Rates in Traverse City

Tkach, of Traverse City Tourism, said the office’s coverage area of ​​Benzie, Grand Traverse and Leelanau counties saw hotel room rate growth of about 3 percent last year. Rates currently range from about $150 to $200 per night on average, depending on the day of the week, season and property.

For this year, he said no significant rate growth was expected, in part because of continued inventory growth.

About 500 rooms are being added to the Grand Traverse area’s approximately 4,000-room inventory, between two hotels commissioned in the last year and several under construction this year. This includes a Tru by Hilton that opened last March in Garfield Township, the free-standing Alexandria Inn that opened in East Bay Township in June and the new Avid Hotel that opened there a few weeks ago, also in East Bay Township. Other hotels under construction include a Residence Inn & Suites and Home2Suites by Hilton in the East Bay and a new Fairfield by Marriott in Garfield Township, all of which Tkach said will open within a year.

That’s in addition to the 2,000 short-term rentals that have been added over the past 10 to 15 years, he said, noting that there are usually rooms at all price points.

Tkach said it remains to be seen whether demand will match supply or whether potential oversupply could push rates down. He tends to think that this won’t be a problem until winter arrives.

“Many variables affect rates,” he said. “…For us, we’ve built a recognizable brand over the years, and so I think Traverse City has given itself the opportunity to dictate a different type of pricing structure and maybe keep that structure a little bit longer that others. able to do it, and the proof was in the results. We continue to see a lot of visits.

But he also said that “consumer behavior is unpredictable,” so only time will tell whether the bureau’s prediction of another strong travel season will come true.

A Look at Greater Petoskey

The Petoskey Area Visitors Bureau covers part of northern Charlevoix County, Petoskey, Harbor Springs, the Boyne Valley area and Alanson, which is along US-31 between Little Traverse Bay and Burt Lake .

The Tourist Office has 28 member hoteliers totaling approximately 2,500 rooms. Another 44 rooms will come online this spring, as the new Otis Harbor Springs hotel now accepts reservations.

Powell said his region’s average daily rates for 2021-2023 are about $188 for that three-year period. Hotels saw “incredible” rate growth of 8% to 16% in 2021 and 2022, driven by higher demand. He expects a more “normal” growth rate of around 2-4% in 2023 and 2024.

He said it’s important to keep in mind that the average rate covers a wide range of prices, from $600 to $800 per night in peak season at an upscale property like the Inn at Bay Harbor, to $469 for a room at the Perry Hotel. at $79 for a basic Super 8 in Petoskey.

As for whether room rates are “too high,” Powell said that’s a question under discussion across the state.

“Prices in northern Michigan have gone up,” he said. “In recent years, it’s very clear that we may have excluded some people from this entry-level product and they may have chosen to go to a different location that might offer a more affordable rate. But by the same token, we (in Petoskey) are benefiting from the spillovers of some other places whose rates may have gone up even higher than ours,” like Mackinac Island, he added.

The view from Mackinac Island

Steph Castelein, events and content manager for the Mackinac Island Tourism Office, acknowledged that prices were higher last year on average across Mackinac Island’s 1,600 rooms.

Although visitation figures for 2023 are not yet known, his hunch is that consumer spending by day-trippers was lower last year and there were likely fewer visitors than the 1.2 million people coming in 2022. But the office still exceeded its revenue goals. , largely because rates were rising.

Castelein said she expects rates to remain fairly stable for the 2024 peak season. A May 7 search of Mackinac Island hotel rooms still available for mid-July showed options ranging from $289 at the Murray Hotel on Main Street to $597 up the hill at the Grand Hotel.

“I think we’re kind of at our peak in a few years right now, so I can see the rates staying similar,” Castelein said.

One indicator of that, she said, is that another 30 rooms will come back online this year, thanks to the completion of the Inn at Stonecliffe’s two-year renovation, adding l offer to the market. July prices for the luxury property range from about $492 for a queen room up to $3,000 for a night in one of the summer cottages.

Petoskey’s Powell said, based on anecdotal conversations, he thinks there is more competition for consumers’ budgets, including for travelers who might consider “long-haul” international destinations. This makes the growing practice of dynamic pricing essential, rather than a set-it-and-forget-it approach to setting rates during peak seasons.

“At the end of last summer…consumers were really returning to some of their pre-pandemic behaviors,” he said, before laughing: “If one more person (talks) about their trip in Spain, or somewhere abroad, I swear.”

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