As Hotel Prices Rise, Bonuses Sag

It isn’t your imagination: Hotel prices really are rising.

Hotels.com has just released its Hotel Pricing Index for the first six months of 2014. Among the findings:

• Average hotel prices worldwide rose 4 percent during the first half of 2014.
• The Hotel Price Index for North America reached 118, just one point off its all-time high of 119 set in the first half of 2007.
• Average prices in the U.S. rose 5 percent, to $137 per night.
• Prices rose in 47 of the 50 most popular U.S. cities (exceptions: Washington, D.C., Salt Lake City, Reno).

Following are the average first-half rates and year-over-year changes in the 10 most popular U.S. cities:

1. Las Vegas – $116 (up 7%)
2. New York – $261 (up 3%)
3. Orlando – $103 (up 3%)
4. Los Angeles – $162 (up 6%)
5. San Diego – $145 (up 6%)
6. Chicago – $165 (up 1%)
7. San Francisco – $208 (up 12%)
8. Washington, D.C. – $164 (down 1%)
9. Houston – $135 (up 6%)
10. San Antonio – $127 (up 2%)

The strong demand underlying the price increases reflects the strengthening economy overall, augmented by several high-profile events (Super Bowl, NBA playoffs, Boston Marathon). If the current trend continues, the rise in hotel rates will far outstrip the rate of inflation.

Winners & Losers

Higher room rates are obviously a positive for the hotels, and for the companies’ shareholders.

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Equally obviously, the higher prices are a negative for travelers. But the adverse effect on travelers doesn’t stop there. With such strong demand, hotel companies naturally feel less pressure to offer generous loyalty-points bonuses and other incentives to keep their rooms occupied.

Marriott’s latest MegaBonbus promotion — a decidedly weaker version of past offers — is just one example of what is likely to be an industry-wide pullback in marketing intensity. As profits rise, bonus points decline.

Reader Reality Check

Have you seen any recent evidence of hotels’ downgrading their promotions’ generosity?

This article originally appeared on FrequentFlier.com.