Europe's energy crisis will see hotel prices soar in 2023

Planning to visit Europe next year? You might want to lock in hotel bookings now because accommodation prices across the Continent are set to rocket in 2023.

According to global hospitality industry analysts STR, between May 2019 and May 2022 the average room rate rose 23 per cent in Italy, 21 per cent in Ireland, 17 per cent in Spain and 12 per cent in the UK. Average daily rates on Airbnb increased by 40 per cent in the second quarter of 2022 compared with the same period in 2019.

More big increases are expected for 2023. In July 2022 the annual inflation rate in the Euro Area is 8.9 per cent. The major cost item behind that figure is soaring energy prices. For a basket of seven European countries, the wholesale electricity price has increased from €86 ($127) a megawatt hour in July 2021 to €324 a megawatt hour a year later.

Those high energy bills are going to be reflected in higher room rates. Some industry experts in Australia are anticipating a 25 per cent increase in hotel prices in Greece and Croatia in 2023. Tour operators signing contracts with Turkish hotels for 2023 are facing increases of between 20 and close to 50 per cent, and that's in euros, not the tumbling Turkish lira.

Even those higher prices are unlikely to dent demand for travel to Europe next year. The floodgates opened over the summer of 2022 and travellers have been rushing back to their favourite destinations. Many operators in the hospitality industry have seen their cash reserves wither over the past few years, there are debts to repay and increased costs coupled with increased demand mean higher room rates.

If Europe is on the to-do list for 2023, you'd do well to book hotels now, provided you can do it without paying a deposit and with the ability to cancel at short notice with no penalty. The cost of private apartment rentals from the likes of Airbnb may rise more slowly than hotel accommodation, but the same advice applies.

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