What are your plans for Christmas and New Year’s? If you are travelling and staying in a hotel, you might have contributed to the price fluctuations of hotel rooms during this holiday season. The hotel and hospitality industry caters to many holiday travellers every year. In the past several years, analytics has brought many changes to the industry.
While the new data available enables hotel executives to build more flexible pricing models and increase revenue through returns on strategic marketing and customer loyalty programs, consumers are always on the other side of the equation. At MaassMedia, we help our clients drive actionable insights from data. Through this indexing project, I took a data-driven approach to examining how a traveller might make smarter decisions about when to buy his or her holiday travel tickets.
According to Business Insider, the best time to book hotels during the December holidays varies by global destination. The article also points out that for US hotels, November is the best time, and booking around Thanksgiving usually brings the highest savings. I tested to see if this is true based on data extracted from Expedia.com, and used import.io, a web data extractor, to collect the prices of hotel rooms for several cities. The cities I collected hotel data from are New York, Los Angeles, San Francisco, Chicago, Washington, Boston, Seattle and Philadelphia, covering several metropolitan areas on both the East Coast and West Coast. Each data collection search was based on a standard room for 2 people for the dates of December 23 – December 30.
The index in this project evaluates the performance of an aggregated grouping of hotels, using star ratings and locations as key indicators to divide submarkets. Room availability and customer demand are two leading factors in hotel pricing models, because for hotels to maximize their revenue they need to set rates according to demand at a certain time. While past historical data is taken into consideration, the actual daily price fluctuations reflect the hospitality market responding to the changes in demand happening right now.
In this case, the median of hotel prices provides a better measure of central tendency, because a few outliers in high hotel price points can have a huge effect on the average and maximum prices. I used the median hotel prices available on the day of data collection to compare eight different cities. By taking the median hotel room prices from eight cities, I visualized the price fluctuations for 3-star and 4-star hotels. The pricing trends for 5-star hotels were not investigated due to small sample size.
Overall, the 4-star hotel submarket has larger variations than the 3-star submarket. For instance, median hotel prices in New York increase 14% from November 4 to December 2nd. In Philadelphia, the median prices for 4-star hotels drop 40% during the same time period. If you have several 4-star hotels in mind, you are more likely to get a better deal if you wait until Black Friday. If you are considering booking a 3-star hotel, make your reservations during the week of Nov 18th (one week before Thanksgiving). The median hotel prices in New York show a fairly substantial increase in both submarkets. While this is not a surprise given New York’s popularity as a Christmas and New Year’s destination, it is still interesting to see the consistency between 3-star and 4-star hotels. If you are going to New York for New Year’s, keep in mind that prices rise substantially the later you book.
I also ranked the variability of hotel prices in different cities to quantify price fluctuations for submarkets of each destination. It turns out that the 4-star hotel submarkets in Philadelphia and Chicago are the ones with the most price variation. In the 3-star hotel submarket, San Francisco is the top city for price variability, with Chicago right behind it. Although the ranking of price variability is not exactly the same in 3-star and 4-star hotel submarkets, there is a strong correlation between the two groups. Since higher hotel prices in 4-star submarket encourage travelers to consider more 3-star options during December holidays, the 3-star hotel submarket could have larger price fluctuations through an increase in variability of 4-star submarket.
This price variability data might help holiday travelers determine a reasonable price range for booking hotels based on their travel destinations. For example, if a 3-star hotel at Philadelphia is $150 per night in early November, you should confirm your hotel bookings as long as the room price is around $117 (a 22% drop), since they are not likely to go below that range. On the other hand, book ahead if you are checking out the 3-star hotels in Los Angeles. Since the prices do not usually change much, watching for a better deal is waste of time.
Given the holiday trends in 2016, do you have a game plan for booking your hotels during the holiday season next year? Let us know what you think!