Hotel rates in Oaxaca dropped by 34%

Six years ago a friend and I visited Oaxaca, a colonial World Heritage city in southern Mexico. We stayed in a little B&B in the centro histórico that had a flower-filled patio and to-die-for breakfasts. We paid $65 a night for a double room. Recently I checked out the B&B again, and the price for a double room was…still $65 a night. Amazed, I checked the rates at a small hotel in Manzanillo, on Mexico’s Pacific Coast, where I stayed three years ago. Again, the rate looked to be unchanged.

Hotel-room prices have dropped in the last year or remained the same in cities all over the country. For those planning to visit Mexico, this means real savings on one of your biggest travel costs: accommodation.

Prices for accommodation in Mexico dropped by as much as 34% last year, reports the international Hotel Price Index (HPI), which tracks hotel prices in 16,000 destinations worldwide. The drop put Mexico’s average hotel costs in 2009 at about their 2003 levels.

And while hotel rates have begun to rise again, there are likely to be bargains out there through the rest of this year.

Hotel prices worldwide dropped an average of 14% last year due to lower demand brought about by the global recession. In Mexico, normally a top tourist destination, visitors stayed away not only because of the recession but also because of a “perfect storm” of negative news, including the A-H1N1 virus.

But this year tourists have begun to return. And numerous travel-industry publications, foreseeing the chance of snagging bargains while the low prices last, have put Mexico on their “must-see” list for 2010.

Lonely Planet, for instance, has named Mexico one of its top “best-value destinations” for this year. And Frommers.com and Hostels.com have both named Mexico City as one of their 2010 Top Destinations.

You may need to hunt for the bargains, of course, and be prepared to negotiate. Hotels’ advertised rates may well be higher than what they’re willing to accept to fill a room. (This difference between list price and actual price is what the HPI tracks. Prepared by Hotels.com and based on bookings made through its website, the HPI reflects the prices customers actually paid for hotel rooms.) So if you like a hotel but think it charges too much, consider haggling.

The Mexican city where hotel prices dropped the most—and which therefore may offer particularly good bargains—is Oaxaca. Hotel prices there dropped by 34%. Oaxaca, a state capital in the interior, is one of Mexico’s best-known destinations for cultural tourism. It has a rich tradition in handicrafts, music, and the culinary arts.

Other cities where hotel prices have been discounted heavily include León and Guanajuato, both in the Colonial Highlands; Puebla, an arts city about an hour outside Mexico City; and Mazatlán, a popular beach resort and expat haven on the Pacific Coast.

In general, beach destinations did not see large discounts in hotels’ rates. The beach resorts of Huatulco, Los Cabos, Manzanillo and Puerto Vallarta only saw rates fall an average of 10% to 16%. The Riviera Maya saw hotel rates drop an average of 14%—while they dropped 23% in nearby Cancún. All these areas have large expat and snowbird populations.

Hotels.com prepares the HPI annually. It analyzed about 94,000 hotels in 16,000 destinations for the 2010 report.