The Influence of Gasoline-price Fluctuations on U.S. Lodging Demand: A Study of Branded Hotels from 1988 through 2000
Canina, Linda Ph.D; Walsh, Kate; Enz, Cathy A.
A 13-year analysis of the relationship between gasoline prices and lodging demand found that a 1-percent increase in gasoline prices results in a drop of rooms demand of 1.74 percent. The study, which is based on brand-name hotels in the United States, was done at The Center for Hospitality Research. The researchers examined monthly room-night data from 1988 through 2000 from the Smith Travel Research database. The researchers also factored gross domestic product into their analysis and included a trend factor as an additional control. All room rates were adjusted to year-2000 dollars using the consumer price index (CPI). Examining the effects of gasoline price increases on various lodging segments, the researchers determined that the effects of rising gasoline prices fall most heavily on midscale and economy hotels, with a lesser effect on upscale properties. For example, a 1-percent increase in gas prices would reduce annual economy-hotel demand by 2.89 percent. Midscale properties with F&B would see a demand reduction of 4.12 percent and limited-service midscale properties would have a reduction of 2.89 percent with every 1-percent increase in gasoline prices. The combined effects of hotel location and market segment clarify the effect of gasoline-price increases on hotels operating in various segments in different locations. The effects of gasoline-price changes are magnified in hotels located along highway that is, those that depend chiefly on automobile access. The most gasoline-price-sensitive group comprises midscale and economy hotels located in highway and suburban locations. The following demonstrates that effect. A 1-percent increase in gasoline prices reduces demand for full-service midscale urban hotels by a little over 2 percent, but for highway properties in the same segment, the loss is nearly 4 percent. Ironically, gasoline-price increases are associated with an increase in demand for resorts in mid- to upscale segments, but resorts in the economy segment see a reduction in demand.
gasoline prices; consumer price index (CPI); room demand
Required Publisher Statement: © Cornell University. This report may not be reproduced or distributed without the express permission of the publisher