Budget hotel vacancies top 50% as inflation-weary Americans cut back on travel

More than half the rooms at budget hotels nationwide were vacant during the first three months of 2024 as inflation-battered travelers cut back on spending, according to the latest data from the hotel industry.

Hotels like Econo Lodge, Days Inn, Super 8 and SureStay posted occupancy rates of  48.7% in the first quarter – down 5% from a year ago, according to preliminary first quarter data from STR/CoStar, which tracks the hotel industry.

The 51.3% vacancy rate has led to revenues per available room dropping 6.5% from the same period a year ago, the largest decline among all hotel segments, the data showed.

The results are “weaker than we thought,” Jan Freitag, national director for hospitality market analytics at CoStar, told The Post on Tuesday.

Midscale hotels, the next level up from economy that include chains like Best Western, saw revenue per room drop 4.5%. Upper-midscale hotels, such as La Quinta, declined 2%. At the other end of the spectrum, luxury hotels suffered just a 0.3% revenue drop, while upper upscale and upscale lodgings increased 3% and 0.4%, respectively.

“We are seeing a bifurcation in the US lodging industry, where higher-end hotels continue to perform well from increases in corporate travel and continued healthy demand from high-end leisure travelers, [while] people in a specific income level are traveling less,” Freitag said.

Room rates for luxury hotels are essentially flat from a year ago at $453 per night on average, while rates at economy properties are down 4% over the same period to an average of $70 per night, according to STR/CoStar data.

In March, the occupancy rate at lower-end hotels was 53% compared to 71% in the luxury market, according to STR/CoStart data.

The actual revenue decline in the economy sector is likely greater because the number of rooms have decreased by 2% as some of the hotels have simply closed or were converted to residential properties over the past year, according to the research firm.

There are other signs that consumers on a tight budget are pulling back.

In January, an American Hotel & Lodging Association survey found that 56% of consumers who earn less than $50,000 said that inflation would play a significant role in reducing the chances of them staying in a hotel over the next four months, while just 51% of people earning $100,000 or more said that inflation was a factor in booking a hotel stay over the same period.

But some budget properties are doing well, particularly in Sun Belt cities where a number of infrastructure projects are fueling demand for inexpensive rooms, according to a report in Skift. 

Among the rising costs from a year ago weighing on consumers are car insurance (up 22.2%), car repairs (11.6%), rent (5.7%), housing (4.7%) and transportation up (4.2%), according to government data.