As Cotton Prices Rise, So May the Cost of Hotel Rooms
Host, "Fast Money Halftime Report"
Apparel makers aren't the only ones stitching together a plan to deal with rising cotton costs. Hotel chains, including some of the world's biggest brands, are looking to pass costs on to customers as soaring commodity prices hit the bottom line.
Best Western, the world's largest hotel family with 4,000 hotels in 80 countries, has seen prices for linens, towels and pillows rise substantially over the past year. A queen sheet-size linen set, which cost $72 a dozen in 2010, now runs $116. Bath towels are up 54 percent. The costs for all hotels are becoming hard to absorb.
"As commodities increase, this could be the perfect storm," said Credit Suisse lodging analyst Joel Simkins. "New hotel construction, steel, raw materials, other inputs, are going to draw down actual supply growth."
Best Western says it is up to each individual hotel to set prices and admits that it's a tough call for a company that considers itself a value player.
Simkins says it may be inevitable if input costs continue to go up. "They could at some point as the pressure persists, but right now, we're not really seeing that," he said. "The good news is the input costs are fairly nominal. It costs the same amount to change a hotel room every other night."
Hotels are also watching oil prices closely, since rising gas prices could keep travelers closer to home this summer.
On Thursday, February 24, Scott Wapner reports from Louisville, Kentucky, on rising prices for such food as beef, corn and peanuts. Look for his story during "Squawk On The Street" at 9am ET on CNBC.