Demand for upscale (think hotels like the Courtyard by Marriott /quotes/zigman/23609459/delayed/quotes/nls/marMAR +1.55% ), upper-upscale (Westin /quotes/zigman/410958/delayed/quotes/nls/hotHOT +0.66% ) and luxury (Ritz-Carlton) hotel rooms will be up 5.5%, 3% and 6%, respectively, from 2013, according to research from Bjorn Hanson, divisional dean of the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University.
And that's coming at a time when supply will increase by just 3.5% (for upscale) and about 1.25% (for upper-upscale and luxury).
The result: "It is noticeably more challenging to find availability," says Hanson
A significant portion of this increased demand is driven by business travelers, as higher-end hotel rooms are "disproportionately used by business travelers," says Hanson
Another reason supply is constrained is due to simple economics: "It's possible to buy an existing hotel for less than the cost of building a new hotel," says Hanson
- and with an existing hotel you're generating cash flow quickly, instead of having to wait for construction to be completed.
All this supply and demand pressure is - not surprisingly - pushing prices upwards.
Room rates in upscale rooms will rise 4.5% this year to an average of $127 per night, upper-upscale rooms 5% to $170 per night and luxury hotels 5% to almost $310 per night, according to Hanson
It is particularly important to book in advance these days, because travelers are booking hotels earlier than ever, says Hanson
- likely thanks to the fact that inventory seems strained to them.
"The way to respond to less availability is flexibility," says Hanson
So, if you can't get a room in the hotel on say a Tuesday ask them about Wednesday as a large group like a convention may just happen to be leaving then, he