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).
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
"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
originally appeared in the March 19, 2012, edition of Business Travel News.