Stagflation and hotel rates

The Wall Street Journal and the Financial Times both report on the resurfacing of a 70’s economic bugaboo, stagflation. Stagflation first surfaced in the Nixon years when a combination of high inflation and economic stagnation resulting in the morphing of the two words to explain the economic malaise of that time. Yesterday’s report in the Wall Street Journal notes that “even stripping out sharply rising food and energy costs, prices rose 0.3% in January, driven by education, medical care, clothing and hotels“. But so far demand for hotel rooms has held steady and in some instances supply has not kept pace. Other factors that may have contributed to stagflation in the 70’s that are, thus far, absent include high unemployment and President Nixon’s now infamous price controls. Regardless, continual increases in world oil prices – some predict $130 per barrel of oil by year end – and a decelerating US economy likely will slow demand for hotel rooms and cause a lowering of rates.