Analyst: Hotels may feel rise in oil prices

Tuesday, Feb. 22, 2000 | 10:40 a.m.

Soaring oil prices could cause a slowdown in the country's hotel and hospitality industry, an analyst warned today.

Jason Ader, senior managing director at Bear Stearns & Co., said price increases in travel costs and lodging costs -- both caused by high oil prices -- could soon begin deterring Americans from traveling.

"So far in the economic cycle, ebullient consumers have shrugged off higher interest rates and higher travel prices without scaling back their vacation plans," Ader said. "The risk is that this latest run-up in gas prices could be the final straw that breaks the leisure traveler's back. If that happens, it could derail the hotel industry from its path toward another year of record profits in 2000."

Crude oil prices recently surpassed $30 per barrel, the highest levels seen since the Gulf War. These high prices result not only in increased costs at the pump, but increased airline fares, hotel room costs and car rental rates, Ader noted. The average daily room rate is expected to rise nearly 4 percent in 2000, and most major carriers have already increased fares by $20 to offset fuel costs.

"All of these factors may combine to negatively impact consumer behavior," Ader said. "The most budget-conscious travelers may scale back or defer travel plans as higher gasoline, hotel and rental car prices combine to drive consumers out of their vacations."