Travel slumping, hotel deals jumping

Cash-strapped travelers may finally get a break on rising hotel prices this fall – courtesy of airline cutbacks and high gas prices.

Airlines' service cuts and rising fuel costs have damped travel demand to several popular resort destinations. That has spurred some hotels to offer plentiful deals and to temper rate increases to woo reluctant vacationers – an about-face from recent years, when soaring demand for hotel rooms led to record room-rate increases.

U.S. hotel room rates overall are still predicted to rise slightly this year. That is partly because of continued strong demand in urban markets and the weak U.S. dollar, which has been attracting more travelers from overseas.

But overall, resort properties across the U.S. last month saw a half-percentage-point decrease in daily rates from a year earlier, the most recent data available, according to Smith Travel Research. Occupancy rates have dropped, too. In Phoenix, for example, hotels are running at about 64 percent occupancy so far this year, compared with 71 percent a year earlier. In Virginia Beach, Va., hotel occupancy so far this year was down about 8 percent from a year earlier.

Bargain hunters traveling to popular vacation spots in Florida, Arizona or Hawaii will likely have the best luck finding deals over the next few months, as leisure-travel destinations are expected to see the biggest flight-capacity cuts – and resulting airfare jumps. Some hotels are slashing rates and throwing in extras (like a fourth night, or meals, free). Other are rolling back rate increases for the first time in years.

In Palm Springs, Calif., hotel occupancy is down more than 6 percent so far this year. In April, the resort town lost its direct flights from Houston on Continental Airlines. And with rising gas prices, “our drive market has been off this summer, no question about it,” says Jeff Beckelman, of the area's convention and visitors bureau. As a result, the tourism organization began touting promotions with discounted hotel rates as low as $89 a night, and resort credits for $100 to spend on spa treatments and golf rounds on a new Web site,

Online travel agencies say they've seen an influx of deals. August hotel-room prices booked on are down about 5 percent from a year ago. And just launched a promotion for fall discounts called “Race to Savings,” good through Jan. 15. Deals include 47 percent off regular fall rates at the Valentin Imperial Riviera Maya in Cancun, Mexico, and 40 percent off fall rates at the Regal Sun Resort at Disney World in Orlando, Fla. (Airfares booked on the site to those destinations are up on average 10 percent and 5 percent, respectively, compared with last year.)

Deals also reflect the impact of a building tear over the past couple of years. Now, as many new hotels open for business, cities and resort towns are flooded with new supply just as travel demand slows.

In places like San Diego, an influx of new hotels is partly to blame for falling room rates, as are rising gas prices and weak housing markets in nearby feeder cities like Phoenix and Las Vegas.

Even business hotels are feeling some pressure. Hotels that cater to business travelers typically negotiate their corporate rates and discounts a year or so in advance with big companies who buy hotel rooms in bulk. This year, in an unusual move, many big companies are trying to renegotiate their rates midyear to get a discount. According to the National Business Travel Association, about 30 percent of corporations reported doing so, which the association says is a significant increase over previous years.

Some resort companies are targeting airfare increases directly. Sandals, a chain of 12 all-inclusive resorts for couples in the Caribbean, just announced a “fly-free” offer with an airfare credit of up to $550 per person for trips booked by Oct. 23. Hawaii has seen about a 15 percent drop in flight capacity from the mainland with the shuttering of Aloha and ATA airlines this year. Already, Outrigger Hotels & Resorts there have seen bookings off by about 10 percent for the fall, says Barry Wallace, the company's vice president. Now, 30 percent to 40 percent of the company's hotel rooms are being offered in discounted rate categories, compared with 15 percent to 20 percent of them last year.