Latest / Inflation Explained with Fexingo: CPI, Prices, and the Cost of Living for Everyday People / The Hotel Room Hotel: Why Your Stay Costs More But Your Flight Doesn't
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- Lucas: So I booked a hotel in Chicago for next month — nothing fancy, a mid-range Marriott near the Loop — and the rate was $289 a night. Luna: Ouch. What was it two years ago? Lucas: About $189. Meanwhile, my round-trip flight from LaGuardia to O'Hare was $198 — basically unchanged from 2024. And that's the weird disconnect the June CPI data really captures. Luna: Yeah, I've noticed that too. Flights feel almost cheap compared to rooms. Lucas: Right. And honestly, if unpacking these kinds of mismatches is useful to you — if it makes your own spending decisions a little clearer — well, buying us a coffee helps keep these episodes ad-free and independent. It's buy me a coffee dot com slash fexingo. Luna: Yeah, literally the price of a latte. And it goes directly into keeping the show going. Lucas: Exactly. So back to that gap: June CPI showed lodging away from home rose 0.4 percent month over month, while airfares actually fell 0.3 percent. Luna: That's a seven-tenths spread in one month. Not huge, but the trend has been persistent. Lucas: Very persistent. Over the past year, hotel prices are up about 5.2 percent, while airfares are basically flat — up just 0.8 percent. Luna: So what's driving it? Is it just supply and demand? Lucas: Partly, but the mechanics are different in each industry. Airlines added capacity aggressively post-pandemic — more seats, more routes, more competition on popular corridors like New York to Chicago. And they have algorithmic pricing that adjusts in real time. If one carrier drops a fare, everyone else matches within minutes. Luna: So it's a race to the bottom, or at least a race to equilibrium. Lucas: Exactly. Hotels, on the other hand, have a much harder time adding supply. Building a new hotel takes years, and many boutique properties and independent inns never reopened after the pandemic. So the room count in many cities is still below 2019 levels. Luna: And demand came roaring back. I read that leisure travel spending this summer is up 12 percent from last year. Lucas: Right. That imbalance gives hotels pricing power. They can raise rates and still fill rooms. And they've been doing exactly that — revenue per available room, or RevPAR, hit an all-time high in Q2. Luna: But isn't there a substitution effect? If hotels get too expensive, people might switch to Airbnb or VRBO. Lucas: They might, but those platforms have seen their own price increases — about 4 percent year over year. And in many markets, the total number of short-term rental listings has actually shrunk because of local regulations. Luna: So the hotel industry basically has a captive audience for now. Lucas: For now. But there's another factor: the mix of travelers. Business travel has fully recovered, and business travelers are less price-sensitive than leisure travelers. They book closer to departure, they want flexibility, and their companies are paying. Luna: So hotels are effectively price discriminating. They charge more to business travelers who can't wait for a deal. Lucas: Exactly. And airlines have tried to do the same with business-class and last-minute fares, but the sheer volume of economy seats — especially on domestic routes — overwhelms that. There's always a cheap seat available if you book two weeks out. Luna: That's actually why I flew to Denver last month for $140 round trip. I was shocked. Lucas: Yeah, and that's the competitive dynamic. Hotels, by contrast, have fewer 'last-minute' discounts because they'd rather hold out for a late booking at full price. They've learned that if they drop rates early, they train customers to wait. Luna: So pricing strategy itself is reinforcing the gap. Lucas: Right. And the Fed is watching this closely. The Fed's Beige Book, which came out last week, specifically noted that 'lodging prices continue to rise amid firm demand,' while 'airline fares remain subdued due to competitive pressures.' Luna: So this is a known pattern. Is there any sign it might reverse? Lucas: Maybe. Hotel construction has picked up — there were about 155,000 rooms under construction in the U.S. as of June, the highest since 2020. But most of those won't open until late 2027 or 2028. In the near term, the supply constraint persists. Luna: So for summer 2026, you're still paying a premium for a room. Lucas: Absolutely. And the data backs it up: the 10-year breakeven inflation rate is at 2.25 percent, which suggests the market expects overall inflation to stay modest. But within that average, hotel inflation is running more than double that. Luna: So CPI might be telling us inflation is cooling, but your hotel bill isn't getting the memo. Lucas: Exactly. And that's the whole point of this show — CPI is an average, but your personal inflation rate depends on what you buy. If you travel a lot and stay in hotels, your personal rate is higher than the headline number. Luna: So what's the takeaway for someone planning a trip this fall? Lucas: Book early, and be flexible on dates. Hotels use dynamic pricing too — a Tuesday night is often 30 percent cheaper than a Friday. And consider alternative lodging if you're in a city with lots of new apartment buildings that have short-term rental units. Luna: Or just fly somewhere cheap and stay with friends. Lucas: That's always the best inflation hedge. But seriously, the hotel-airfare gap is a great example of how aggregate inflation numbers can hide really different experiences in different sectors. Luna: And it's a reminder that when you see a headline like 'CPI drops,' it's worth asking: drops for whom? Lucas: Exactly. For airline passengers, yes. For hotel guests, not so much.