How will higher gas prices impact US hotel results?

Jan Freitag, national director for Hospitality Market Analytics at CoStar said they have never been able to establish a relationship between gas price increases and hotel demand decline. “We even looked at hotels near interstate locations,” he said.

The way he thinks about it: “Your car has a 20-gallon tank. Gas goes from $3.50 to $4.50. So, you need to pay $20 more per tank. Let’s assume it takes you four tanks to drive your family to Disney and back on spring break. Are you really not going to see Mickey Mouse because of $80? Probably not. You may make different choices, booking a limited-service hotels versus a full-service hotel, or get one more fast-food lunch versus a sit-down restaurant.”

Freitag reiterated that only economy segment hotels have the expected (but weak) relationship to gas prices. “Even in drive-to markets, no relationship between gas prices and demand,” he said.

Michelle Russo from asset management firm hotelAVE said it’s too early to tell what impact higher gas prices will have on the hotel business.

“Generally, there has been little impact to hotel occupancy; instead, there is an occupancy shift – shorter driving trips and more regional vacations,” Russo said. “Lower-tier hotels are more sensitive to gas prices (but not luxury).”

David McCaslin from CapStar Advisors added, “In the near term, negative impacts for our industry will be felt primarily by summer drive to leisure markets in the mid to lower tier price points. These have the most price sensitive consumers and the calculation of the cost impact to their vacation is the most direct and most discretionary.”

Analysis from analyst R.W. Baird does not indicate a strong relationship has existed between higher gas prices and hotel demand. What is more likely to have an impact: changes in employment, consumer confidence, and corporate profitability.

This segment (economy-to-upper-midscale traveler) is already traveling less, is far more price sensitive, and feels fuel inflation immediately, whether flying or driving.

Eric Jacobs

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Baird’s Michael Bellisario wrote that gasoline represents ~3% of household expenditures, and total energy expenditures, including electricity and natural gas, are about 6%, adding that these percentages are at/near relative lows over the last 20-plus years. Also, he said, income tax refunds are higher YTD (+11% y/y), which should cushion some of the near-term impact from higher prices at the pump.

For owners, Bellisario said electricity costs were on the rise prior to the recent spike in gas and oil prices. As a result, higher energy costs could be a slight incremental headwind to owners’ profitability in 2026E. For select-service and full-service portfolios, utility costs represent ~3.5%-4% and ~3% of total revenues, respectively.

But what Baird did not touch on, according to hotelAVE Chief Investment Officer Loren Balsam, is the inflationary effect on food and beverage costs and guest supplies. “An extended period of higher oil prices will ripple through cost of distribution of goods hotels (and consumers) typically purchase,” Balsam said. “It will be interesting to see how it hits the items in the CPI basket.”

The team at Aimbridge Hospitality told Hotel Investment Today that historically, fuel spikes push airfare higher quickly through fuel surcharges, but demand destruction is typically limited unless paired with a broader economic downturn. “We are seeing that pattern again as airlines are raising fares, yet overall travel demand remains resilient,” said Aimbridge Chief Global Growth Officer Eric Jacobs.

He said luxury leisure demand is the strongest segment today and is largely insulated from airfare inflation. “Affluent travelers are unlikely to change behavior materially, and any airline capacity reductions are unlikely to be large enough to impact that segment meaningfully,” Jacobs said, adding that the real risk lies with the economy-to-upper-midscale traveler. “This segment is already traveling less, is far more price‑sensitive, and feels fuel inflation immediately, whether flying or driving.”

Let’s see what prices at the pump look like come Memorial Day. Most the drive-to leisure is shorter booking window. So, we are out of the demand window still.

Sloan Dean

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Aimbridge said as gas prices rise, discretionary trips, weekend travel, and shoulder demand are most likely to soften. “This is where the impact becomes meaningful for our portfolio, particularly in secondary markets and hotels reliant on drive‑to leisure and price‑sensitive demand,” Jacobs added.

Hotel investor Glyn Aeppel of Glencove Capital said she cannot imagine gas prices sliding back down anytime soon but rather continuing to rise. “This will have a significant impact on the cost of travel with a strong likelihood of significant reductions in the volume of travelers,” she said. “Also, potential operating cost increases which will impact profitability margins.”

Ben Rafter, CEO at Hotel Equities said that while they have not seen demand declining, higher gas prices always lead to lower demand via higher airline ticket prices, energy surcharges and lower summer automobile travel. “In this case, domestic travel to places like national parks and Hawaii may uptick as Americans avoid international travel due to global turmoil. Major international inbound markets, conversely, will be impacted negatively, albeit this was already expected due to several other factors,” he said.

Former Remington Hospitality CEO Sloan Dean told Hotel Investment Today that he believes higher gas prices will hurt drive-to leisure markets in the summer, especially economy and midscale, if the higher prices persist.  “There’s no-to-little impact to-date YET,” he said. “But let’s see what prices at the pump look like come Memorial Day. Most the drive-to leisure is shorter booking window. So, we are out of the demand window still.”