The high season kicks off with sharp rises in hotel prices to offset the impact of rising energy, beverage and food prices, and even wages. The large chains have revised their rates upwards taking advantage of the demand accumulated during the two years of the pandemic and for now they have not noticed any impact on their reservation books.
Meliá, the first hotel company in Spain, foresees that the 18% rise in rates experienced at Easter will continue in summer, with higher prices and the same occupancies, which will result in higher income. “For July, August and September a very positive season is expected, which in global terms would equal the income of 2019, and In particular, a significant increase in tariffs differentiated by zones is observed.. For urban hotels, the forecast is an increase of 5%, while for island and coastal hotels, the average increase would be around 15%, with the Canary Islands in the lead”. Despite this, they recognize that the rise in energy, beverages, food or wages (inflation has climbed to 10.2% in June) will erode a significant part of the margins. “Inflation and energy and utility costs will ‘eat’ a part of our profitability because not everything can be passed on to the end customer.”
Meliá predicts that the rise in costs will eat a good part of its profitability
From Barceló they also confirm that price rise, even above pre-crisis levels. “Although the results depend on each destination, in general terms, sales for this summer have grown by 12% compared to 2019 and rates around 8%. We have increased prices moderately compared to 2019 not only due to the increase in inflation and energy costs, but to the important investment we have made in the last two years in updating some of our hotels in Spain”. The hotel company has undertaken reforms worth 150 million in the last two years that have served to improve hotels and be able to charge higher rates.
Profitability and costs
The Balearic chain RIU also expects to exceed the arrival figures for the 2019 season, despite the fact that it will also revise its prices upwards. “Average rates are rising in all markets, national and international, depending on the hotels. The average increase can be estimated between 5% and 10% But the truth is that costs are increasing at a much higher rate. Thanks to the good demand, a small part of this extra cost can be transferred to the price, but the rest goes directly to the profit margin”, they emphasize. “We are concerned because the escalation of prices does not seem to reach the ceiling and it is impossible to pass on these extra costs in the rates. They will have to load up on the margins and wait for the market to stabilize.”
Barceló justifies the increase in rates for the 150 million invested in reforms
A report prepared by Mabrian Consultingspecializing in data analysis, on the prices that hotels are charging in the main Mediterranean destinations (France, Italy, Greece, Spain, Portugal, Egypt, Tunisia and Turkey) reveals that prices have risen across the board, although there are few exceptions, such as three- and four-star hotels in France and four-star hotels in Italy.
In the case of Spain, the average rate for three-star hotels has risen 6.9% to 108 euros, while the price of four-star hotels has grown 5.1% to 145 euros. The five-star hotels are the ones that have become more expensive, with an annual increase of 14.2% to 289 euros. Despite this, when compared to the other seven destinations, Spain continues to remain below France, Italy and Greece, with much higher prices. “Greece is the real star here, with four and five star hotels experiencing a 62.7% and 110% increase in price, respectively,” he stresses. Carlos Cendra, director of sales and marketing of Mabrian.
At a breakfast held last week, the CEO of the Barceló hotel division, Raúl González, justified the price increase by the increase in costs and stressed that despite this increase, the prices of hotels in Spain continue to be very competitive when compared to other European destinations. And he gave the example of the Barceló Imagine, the five-star hotel where the meeting was held, with a price of 200 euros per room. “In Germany, France or Italy, the price is much higher,” said González.
Cost control. The hotel company owned by the Thai Minor recognizes that the impact of inflation is acceptable “because prices are already above those of 2019 and we maintain cost control from the time of the pandemic.”
Prices. In the third quarter of 2019, the average price of an NH hotel room in Spain was 100.8 euros, above the average for the company’s hotels (100.1 euros), but below the rates that were charged in Italy (124.8 euros), in the Benelux (109.2 euros) and in the EU average (101 euros).