Why Asian hotel prices fell in 2014 when travel rose

The increase in supply, particularly in countries like China, Hong Kong, Singapore and India, was part of the reason for hotel room prices falling in Asia last year.

"Asian hotel prices not only fell for a second consecutive year in 2014 but are now only slightly higher than they were 10 years ago."
Abhiram Chowdhry, Vice President Asia-Pacific, Hotels.com

There were other factors in Asia too. Weaker currencies, political unrest, extreme weather and aviation disasters also had an impact on hotel prices in the region in 2014.

The average price paid for a hotel room around the world rose by 3 per cent in 2014 compared with 2013 – and Asia was the only region in the world where prices actually fell.

The latest Hotels.com Hotel Price Index (HPI), which tracks the actual prices paid for hotel rooms, show hotel prices in Asia in 2014 were down 2 per cent from 2013. This is in stark contrast with North America, where hotel prices rose 5 per cent.

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In fact, while hotel prices globally experienced five successive years of steady price rises after plummeting during the global financial crisis of 2008/09, Asian hotel prices not only fell for a second consecutive year in 2014 but are now only slightly higher than they were 10 years ago.

Standing at 104, Hotels.com's HPI for Asia has lost 27 points since its peak in 2007, signalling hotel prices in the region still have some way to climb back to those heady pre-GFC days.

Countries like Vietnam, Thailand, Malaysia and Indonesia saw the most marked price falls, while prices paid for hotel accommodation in cities like Hanoi, Phnom Penh, Chiang Mai, Ho Chi Minh and Bangkok made these among the best-value cities in the world for a night in a hotel.

Hotel prices were down 4 per cent in China while in Hong Kong hotel prices slipped around 2 per cent, partly due to the increased supply of hotel rooms.

Unforeseen tragedies, including the missing Malaysia Airlines flight MH370 and the loss of MH17, left their own mark. The twin air disasters had a significant impact on travel to Malaysia, resulting in Kuala Lumpur hotel prices decreasing by 11 per cent in 2014.

Meanwhile political tensions in some Asian countries also played a role in affecting hotel prices, as some travellers rethought their travel plans and avoided certain destinations.

One of the countries where this was most apparent was Thailand, where political instability had flow-on effects for local hotel operators. In an attempt to counter anaemic tourist demand, hoteliers applied heavy discounting to their room prices. In Bangkok alone, hotel prices fell around 9 per cent from their 2013 level.

Currency ructions too played a role. Some of the bigger currencies in Asia fell against the US dollar in 2014, cutting prices in local currency terms. A fall of approximately 20 per cent in the Yen-US dollar exchange rate over the course of 2014 helped encourage a surge in travellers to Japan.

With accommodation demand at an unprecedented high, Japanese hoteliers were able to increase their prices quite substantially, with Tokyo alone recording a 7 per cent increase in hotel prices in yen terms, offset by the overall lower cost of Japan for foreign travellers.

While a fall in hotel prices in Asia meant generally good news for travellers to this region in 2014, hoteliers in Asia can expect continued reasonable occupancy levels this year as travellers – both international and Asian – continue to seek out good quality at competitive rates, particularly at the high end.

While prices are always the bellwether of sometimes unpredictable supply-demand dynamics, the outlook for Asian hotel owners and operators is reasonably bright as they continue to benefit from the rising numbers of Asian travellers, in particular the Chinese, as Asian nations continue to benefit from rising prosperity.

Abhiram Chowdhry is Vice President Asia-Pacific at Hotels.com.

The Hotels.com Hotel Price Index (HPI) is based on bookings made on Hotels.com sites around the world and tracks the actual prices paid per hotel room (rather than advertised rates) for more than 169,000 properties. The figures referenced here are based on prices paid by US travellers in US dollars (USD) in 2014.