June 9, 2004 -- While it's already more expensive to travel due to high gas prices, it's become pricier to lay your head down once you reach your destination as well. According to a forecast by Pricewaterhousecoopers, hotel prices are poised to jump 3 percent this year and another 3 percent in 2005. Rates have fallen or remained virtually flat for the past three years.
The forecast estimates that occupancy rates will increase more slowly: 1.6 percent in 2004 and 0.9 percent in 2005. This marks a deviation from the traditional strategy of filling beds even when it comes at the expense of price.
The 3 percent increase would put the average daily rate for a room at just under $86 in 2004 and just over $88 in 2005.
The increases come on the heels of swelling demand, which has passed historical highs. In the first five months of 2004, room revenue and demand for rooms hit record levels, according to an estimate by Smith Travel Research, which also provided data for the Pricewaterhousecoopers forecast. The previous peak for the same period was in 2001. Occupancy and average daily rates still fall short of the 2001 highs due to an increased number of rooms.
The results came as a surprise to PricewaterhouseCoopers, which two months ago forecasted a rate increase of only 1.9 percent.
MATT QUINN contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.