Core Inflation and Hotels

A reuters report released yesterday indicates that Core Inflation in March rose at its fastest rate in a year. Core inflation is a relatively newfangled idea conjured by the Feds, supposedly, to take out the volatility in food and energy prices – components of the traditional CPI.

What may be of interest to the hotel industry is that, as a component of the Core index, hotel room rates went up by 0.8 percent. That of course reflects Revpar growth that has fortunately been reasonably broad based across the country. But when coupled with sky-rocketing energy prices (reflected by oil approaching $72 a barrel) and higher core inflation, are we about to witness an inflationary pattern that upsets what has been a relatively tranquil period of some 10 plus years of non-inflationary growth? Thus far, consumers have not balked at escalating hotel prices in major cities across the US but bundled with higher airfares and gasoline prices, it just might do more than dent a remarkable run in economic growth. That ought to worry hoteliers and developer/operators in particular.

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Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.