The price of gas continues to rise in the U.S., but hoteliers aren't nervous that surging fuel prices or inflation might dampen summer travel demand.
Nationwide, gas prices are nearing an average of $4.50 per gallon, and could exceed $5, according to CNN Business. CNBC reports the indexes that track the price of gas and groceries rose 1.7% and 1.5%, respectively, in April.
In a data analysis published in March, STR — CoStar's hospitality analytics division — found that historically, gas prices have a limited impact on hotel demand in the U.S.
During first quarter earnings conference calls, hotel executives who addressed rising gas prices and inflation indicated they are optimistic that there will not be a drag on leisure demand this summer.
Geoff Ballotti, President and CEO, Wyndham Hotels & Resorts
"Weekend RevPAR exceeded 2019 levels by 10% and we did not see any meaningful impact from rising gasoline costs, as occupancy for our select-service brands remained steady to about 96% of 2019 levels in the weeks before and after the gas price increase in March. And with the US Travel Association reporting that nearly 9 out of every ten Americans are expecting to travel this summer, we expect to see continued strong drive-to leisure demand throughout the summer season. …
"We haven't seen really any measurable impact from gas prices. And what we're hearing and seeing from customers, what we're hearing from our franchisees, is nothing but optimism. In terms of the trends, what's impressed us and, I think what's giving our franchisees just great confidence, is how strong the ADR gains are out there. We talked about an ADR gain of 8% in the first quarter 2019. That's grown to 13% April month-to-date. And April weekend ADRs are really impressive.”
Jon Stanner, President and Chief Executive Officer, Summit Hotel Properties
“We really haven't seen [pushback from leisure travelers due to inflationary pressures] anywhere. Certainly it’s something that we're watching closely, particularly as gas prices have risen and the cost of airline tickets have risen. We haven't seen any pockets of softness really anywhere across the portfolio. I know it's something that we're monitoring very closely, but our pricing power in March and April have been as strong as they've been in any time since the pandemic. And I don't think we've seen at least historically a strong correlation between rising gas prices hurting hotel demand. So we'll hope that continues to hold this cycle, but the simple answer is we haven't seen any effect so far.”
Chris Nassetta, President and CEO, Hilton
"There's a very low correlation between what's going on with fuel prices and demand in our business. You can go back to '08, '09, when oil hit $150-plus a barrel, and we went and looked at all those periods. And there's not a very high correlation.
"I think it has a lot to do with the consumer psychology, which at the moment, there are certainly lots of fears and uncertainty about where the world goes. But at the moment, as I said, the consumer has an abundant amount of savings as do businesses and a burning desire to sort of get out there and do business and/or experience the world after having been locked up a lot more than they would have liked to. So we're not really seeing any of it.
"Now there's also a phenomenon that we'll shift around, but if you looked at our business pre-pandemic, sort of roughly two-thirds of the business, 60% to two-thirds were 'fly-to' and the rest were 'drive-to.' That's flipped around during the pandemic. And it's still disproportionately, the majority right now even with where we are in recovery, are people driving. ... Now gas prices are going up, too, but maybe not proportionately as much as the airline ticket is.
"So there is a little bit of a substitution effect that I suspect is going on with people deciding they'll drive a little further, right? They kind of got used to COVID like, 'Hey, it might have been a two- or three-hour sort of limit before, and now it's a five-, six-, seven-hour limit for what they're willing to endure to drive."
Raymond Martz, Executive Vice President and Chief Financial Officer, Pebblebrook Hotel Trust
“Leisure continues to be robust, which we expect will continue as we get into the heavier leisure travel season later in the spring and summer. We haven’t seen any pullback in leisure demand or spending levels due to rising gas prices or inflation. And we wouldn’t expect much impact given the type of luxury traveler at our upper-upscale and luxury hotels who is in a strong financial position and is generally less impacted by these factors.”
Patrick Pacious, President and CEO, Choice Hotels International
"Even with rising inflation in gas prices, we continue to expect strong consumer demand especially as we enter the busy summer leisure travel season. Based on our focus group research and current projections, we do not expect to see an impact on aggregate travel demand through the summer travel season.
"It is worth noting that gas prices historically have had little to no impact on travel. Rather, consumers indicate that rising fuel costs could mean adjustments in how they spend their money such as traveling shorter distances, choosing destinations closer to home or not dining out as often, but they are going to travel.
"Indeed, recent studies point to a significant year-over-year uptick in consumers' intent to travel in the next six months. Nine out of 10 American travelers surveyed are saying they are ready to travel, the highest levels we've seen over the last two years. Likewise, we are continuing to see the return of customers who were once hesitant to travel."
Barry Bloom, President and Chief Operating Officer, Xenia Hotels & Resorts
"Across the portfolio and across segments we have seen very little if any great pushback and that the rates where our hotels are asking for, they are typically getting, and that's been true really across all segments. We know how strong leisure has been. Atish gave some commentary about our rate being up on the group side, despite pasting down and moved. So even with a relative lack of demand we're able to — the hotel has been able to drive a lot of rate.
"As it relates to inflation impact on the consumer pocket book, certainly, beyond what, what we think about everything that we're seeing at least in the next three months, as it relates to transient booking pace, is at continued high and in many cases, sequentially higher rates. So really hard to point to anything other than conversation. And that may be a factor down the road."
Atish Shah, Executive Vice President and Chief Financial Officer, Xenia Hotels & Resorts
"In the short term, the consumer is expecting to pay more for everything right now. They are seeing inflation everywhere. So that's not that surprising that they are paying more for hotel rooms, too. So we're able to capture this certainly here in the short term, and we feel really good about where corporate transient and group demand is trending. So that really gives us an opportunity that to the extent that we need to pivot away from leisure a little bit and we have the ability to really start accommodating more of that corporate, transient and group again, which to Barry’s point is also coming at very attractive rate."
Liz Perkins, Chief Financial Officer, Apple Hospitality REIT
"Demand came back quickly, we did not reduce staffing, anticipating that demand would return for the spring and summer. We had open positions, we're continuing to fill open positions and we're still in an inflationary environment where cost and supply-chain issues, inflationary pressures and wage pressures will — are evolving. And so we're optimistic, again, looking at the top line, preliminary top line for April, we're optimistic. And the team has shown that we will maximize in any environment. So regardless of what may happen on the top line, our team has done an exceptional job maximizing margin."
Editor’s note: Chris Nassetta serves on the board of directors of CoStar Group, Hotel News Now’s parent company.