Consumer Price Index

How BLS Measures Price Change for Lodging Away From Home in the Consumer Price Index

Lodging away from home, a component of the other lodging away from home including hotels and motels index, is included in the shelter index of the Consumer Price Index. The other lodging away from home including hotels and motels index is published on a monthly basis for all the areas for which CPI data are published. It includes the three components shown below with the relative importance of each index. These data are from the December 2007, U.S. city average of the All Urban Consumers Price Index (CPI-U): Lodging away from home, a component of the other

Item

Relative Importance

Lodging away from home 2.564
Housing at school 0.148
Other lodging away from home including hotels and motels 2.416

Other lodging away from home including hotels and motels has approximately 94 percent of the weight of the lodging away from home index. This is by far the largest component of the index, and is published separately at the U.S. level.

The base period weight for each CPI item group is the out-of-pocket expenditures households incurred for that item in 2005-2006. The weight for rental of lodging away from home reflects household expenditures for lodging while on vacations, visiting family and friends, or attending to personal business. In addition, the weight reflects the rental value of owned vacation homes. The CPI includes short-term rental accommodations available to the general public. Long-term rentals intended for year-round residence or rentals available only to large groups, institutions, and businesses are excluded from the index.

The sample of outlets for the lodging away from home index reflects actual expenditures for out of town lodging as reported by respondents residing in the CPI's 87 sampling areas. However, because these expenditures are made all over the country, not just in the 87 pricing areas, hotels and motels are priced for rentals of lodging away from home throughout the United States. The most recent revision of the CPI, first published in January 1998, further improved sampling, data collection, processing, and statistical estimation. Many of the samples underlying the CPI were replaced. These samples included geographic areas, items selected for pricing, and outlets in which items are priced.

Estimates of price change for lodging establishments are often quite volatile because the sample establishments tend to be located in vacation areas (such as beaches, ski resorts, or other areas) with significant seasonal pricing patterns. For this reason, the current sample size is approximately 4370 quotes.

Selection of characteristics to be priced

When CPI economic assistants seek prices for rental of lodging away from home, they first select the major price-determining characteristics of the stay. The type of room and the view from the room are examples of price-determining characteristics. Using probability sampling, all of the room options (such as suite, deluxe, standard, etc.) are given their appropriate chance for selection. Once a room is selected, then the many characteristics associated with the room/hotel are identified to ensure that the same situation is priced each collection period, or if there is a change in the situation, that change can readily be identified. The following is an example of characteristic information that would be identified: Occupancy—two adults;

Type of accommodation—deluxe room;

Room classification/location—ocean view, room 306;

Time of stay—weekend;

Length of stay—one night;

Bathroom facilities—one full bathroom;

Kitchen facilities—none;

Television—one, includes free movie channel;

Telephone—one telephone, free local calls;

Air-conditioned—yes;

Meals included—breakfast;

Parking—free self parking;

Transportation—Transportation to airport, no charge;

Recreation facilities—an indoor and an outdoor pool, a private beach, three tennis courts, and an exercise room.

Quality Changes

One of the most difficult problems for the CPI is to accurately quantify changes in the quality of items and to factor these quality changes out of the items' price movements. Once a BLS economic assistant selects an item for the CPI, and describes it by enumerating all of its quality-determining attributes, then each successive time an economic assistant collects the item's price a comparison of its current characteristics is made to that of its previous description. If any of its characteristics change, a quality improvement or deterioration may have occurred. In addition, because quality change often accompanies price change, when the price of an item changes significantly, the economic assistant asks the respondent to identify a cause.

When there are changes in an item's characteristics or significant changes in its price, an analyst in the national office carefully reviews the collected data. Then, using information from the economic assistant and knowledge about the market for the item, the analyst determines if a quality change has occurred. If so, and if the analyst can identify the value of the quality change, the value of that quality change is removed prior to calculation of the index. However, if the quality change is significant, and the analyst cannot determine its value, that item is not used in calculating the index for the month and the quality change is reported. For example, suppose a hotel room selected previously now includes complimentary breakfast and dinner, has been renovated, and now includes a VCR. The price of the room has increased, and the price change is strictly due to these enhancements. This change in price, due to the change in quality of the services provided, would not be reflected in the index.

Additional information Additional information on the Consumer Price Index can be found in the BLS Handbook of Methods, chapter 17, "The Consumer Price Index," Bulletin 2490 (1997). This chapter is also available on the BLS Internet site (http://www.bls.gov) under the topic "Publications," or you may call the Information and Analysis Section of the CPI at (202) 691-7000.

Last Modified Date: March 28, 2008

Recommend this page using: