2012 Corporate Travel Index: Hotel Cost Increases Push EMEA Per Diems Moderately Higher - Business Travel News

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2012 Corporate Travel Index: Hotel Cost Increases Push EMEA Per Diems Moderately Higher

March 20, 2012 - 10:10 AM ET

By Michael B. Baker

Despite looming economic uncertainty in Europe, travel buyers in 2011 paid significantly more for hotels in the continent's most expensive cities than they did in 2010. Meanwhile, per diems in the costliest Middle Eastern locales stabilized. Declining meal costs offset some of those increases throughout the EMEA region.

As measured in the Corporate Travel Index, overall per diem costs across the Europe, Middle East and Africa region increased by 3.7 percent year over year, with a 7 percent increase in hotel costs tempered by a 1.2 percent decrease in meal costs. In many of the region's most expensive cities, hotel rates were up by double-digit percentages, even with a slight year-over-year weakening of the euro and Swiss franc against the U.S. dollar.

[Please click here to view the digital edition of the 2012 Corporate Travel Index, featuring all per diem listings, downloadable as a pdf.] 

Bob Brindley, vice president of BCD Travel consultancy Advito, said the increases largely were due to favorable comparisons with the weakened hotel market of 2010. "That was still a down year for hotels, and the meeting markets had not recovered," he said.

Geneva remained the most expensive city for business travelers in the region—and the world—with a total daily cost of $559, up 6.2 percent from last year's Corporate Travel Index. Hotel costs in Geneva were up almost 15 percent, while food costs were down 7.3 percent.

Oslo, the region's most expensive city for meals, remained second-most expensive overall at $544 per day, up 3.6 percent from last year, followed by Norwegian oil industry hub Stavanger.

Overall high food costs and a 9 percent increase in hotel costs propelled Stockholm to the fourth-most expensive slot in EMEA, followed by Zurich, where overall per diem costs were up 12 percent to $519.

Muscat, Oman, remained the most expensive city in the Middle East, with a per diem of $493, up 4.6 percent from the previous year. Though Muscat's hotel costs nearly were flat, food costs were up 14 percent. Riyadh, Saudi Arabia, was close behind with a per diem of $479, up 5.8 percent from last year; hotel rates were up 10.6 percent.

Other cities in the region with significant per diem cost increases included the Swiss city of Basel (11.7 percent), Kiev (10.7 percent), Munich (10.9 percent) and Lisbon (12.4 percent, including a 26.1 percent increase in hotel rates). A handful of cities became cheaper for business travel, including Amsterdam (down 6.4 percent), Abu Dhabi (down 3.1 percent) and Johannesburg (down 9.4 percent).

Despite Instability, Costs Moderate 

Corporate hotel rates in Europe this year should grow much more modestly. Advito projects a 2 percent to 3 percent increase from 2011 corporate rates. There isn't much hotel construction in Europe, but hoteliers expect the eurozone's economic tumult to stymie demand.

Arne Sorenson, president and CEO-elect of Marriott International, in February noted that "government-related travel has been weak in the U.K. provinces for some time, largely due to government austerity programs. We estimate government-related business represents 10 percent of lodging industry demand in Continental Europe, so a broader adoption of such programs could have a negative impact on the industry."

Even Switzerland, a fairly healthy economy that's not part of the eurozone, saw only modest increases in 2012 corporate rates, Brindley said.

"Our view is that Europe and the rest of the world will continue to do just enough to hold things together through 2012," said Starwood Hotels & Resorts Worldwide CEO Frits van Paasschen during a February conference call. "There will be periodic bouts of intense anxiety, and even with the resolution of the Greek debt negotiations and an IMF firewall, the macroeconomic environment will be tough in the first half in Europe, with the hope of some improvement as the year progresses."

Business travel demand won't be hit as hard in gateway cities, which will continue to see strong inbound travel volumes from North America, Asia/Pacific and the Middle East. London this summer will be particularly challenging for corporate travel owing to the 2012 Summer Olympics; some hotels already are demanding five to 10 times their usual rate during the period, according to Advito. Richard Saunders, Carlson Wagonlit Travel senior director of the global partners network for the EMEA region, said corporate rates in London on average rose about 4 percent for 2012, skewed by double-digit increases during the summer months. Brindley projected that rates also are likely to be significantly higher before and after the Olympic period because of pent-up demand.

"The good advice is to stay away if you can, though that certainly does not help companies based in London," Brindley said.

Advito projects corporate hotel rates in the Middle East will increase by 6 percent to 7 percent this year. Rate growth will be particularly strong in Israel and Saudi Arabia—with predicted 2012 increases of 13 to 15 percent—and more moderate in such cities as Dubai and Doha, which continue to see many new hotel openings.

Corporate travel costs in the Middle East also will depend on levels of political instability. "Local economies should be benefiting from higher oil prices, but political unrest and the weak European economy continue to discourage travel, particularly to Egypt," Sorenson said.

Rates in South Africa should remain flat or decrease, as hotels there remain open to negotiations, said CWT's Saunders. Rates will be high in cities with little hotel availability, including Lagos, Nigeria, and Luanda, Angola, both of which are growing business travel destinations, he said.

This report originally appeared in the March 19, 2012, edition of Business Travel News. 

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