Hotels have raised their prices due to increased demand following the Covid-19 pandemic, as well as rising costs. However, some hotels have been cutting back on services to save expenses, leading to reduced perks, infrequent room cleaning, and other inconveniences. This trend, referred to as “skimpflation,” has gained attention in popular tourist destinations like France, where prices have soared. With the slowdown of “revenge travel” and the high cost of accommodations, consumers may begin to question what they are getting in return for their money.
As Covid-19 restrictions eased and travelers rushed to vacation destinations, many discovered that hotels were unable or unwilling to provide the same level of amenities as before the pandemic. Staff shortages and cost-saving measures resulted in delayed repairs and limited services. Prices have since soared, particularly driven by demand from American travelers with a strong dollar. Despite flat occupancy rates, average daily rates in Parisian hotels have doubled since 2019, boosting profitability and offsetting other costs.
However, staffing shortages persist in the industry, with many hotels struggling to fill positions. This issue is especially prevalent in Greece, where even relaxed employment requirements for migrants have not solved the problem. After shedding millions of jobs in 2020, the travel sector is now facing a less attractive labor market, as alternative job opportunities with better pay and hours become more available.
One aspect of skimpflation in hotels comes from reducing wages, which are often the largest cost for these establishments. How these savings are passed on to consumers is not always easily identifiable. Unlike purchasing groceries, where consumers can easily notice shrinking portion sizes, evaluating service quality can be more challenging. Consumers tend to focus on nominal prices rather than shifts in costs. For example, halving the duration of a massage while keeping the price the same effectively doubles the per-minute cost, but this is less likely to cause outrage compared to doubling the price of the original massage.
Perhaps travelers’ acceptance is reaching a tipping point. While overall satisfaction with hotels remains positive, scores for value and service have started to decline in some European cities. Psychologically, consumers may shift away from the desire for revenge travel, prioritizing experiences over price, toward a strong desire to avoid feeling ripped off. As one traveler in Corsica stated, they have refrained from dining out due to the sense of being taken advantage of.
The rebound in travel is not expected to disappear entirely. However, European arrivals are projected to be around 11% lower than 2019 levels by the end of 2023. Additionally, the combination of softening demand and persistent cost inflation, such as the spike in jet-fuel prices, may lead to more belt-tightening in the industry. Budget accommodations may fare better under these circumstances.
One potential positive outcome from this pressure on hotels is a greater focus on efficiency and automation. Implementing technologies such as self-check-in, mobile app services, and cashless payments can free up human resources. While this may result in fewer staff at reception and potential tech glitches, it could lead to higher guest spending, similar to trends seen in self-service restaurant kiosks and cashless transactions.
After the “Beyoncé effect” of this year’s travel boom, the tourism industry may need to adapt and provide a different kind of experience to meet changing consumer expectations.
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