Corporate hotel rates for 2013 spiked in Latin America and
select U.S. markets, meeting expectations for a tough negotiating season. But
increases were more moderate in Europe and some emerging markets in Asia.
In the United States, the average corporate hotel rate for
2013 increased by 5.3 percent compared with the previous year, "maybe a
little more than expected," said Yon Abad, director of Carlson Wagonlit
Travel's Hotel Solutions Group in the Americas. In New York, the average corporate
rate is up 10.2 percent following challenging negotiations that saw hotels
initially propose increases north of 16 percent, he said.
Bob Brindley, vice president of business solutions for BCD
Travel's Advito consultancy, reported a slightly lower average corporate rate
increase for New York. "Markets like Boston, San Francisco and Chicago had
higher increases than New York," he said. "New York has had such high
increases the past few years, that it's gotten to the point where clients were
doing whatever they could to decrease demand."
Walt Disney Co. vice president of global travel Alda Garone
noted particularly difficult negotiations this year for New York as well as for
locations in Asia. Even so, she kept the overall increase below average. "We
were glad that, overall, it was only a 1.5 percent increase year over year,
globally," Garone said during The BTN Group's Travel Management 2013 event
in December. "There were about three rounds of negotiating, and we also
narrowed the number of hotels we will be using globally."
Speaking at the same event, JP Morgan Chase vice president
of global travel Erin Barth said she similarly was successful after multiple
rounds of negotiations.
"We realized less than a 3 percent increase worldwide,
which was a very large achievement for us considering where we started,"
she said. "We also secured a very large percentage with two-year
Barth partly attributed the relatively low average price
hike to increasing by 300 the number of properties in major markets that were
sent requests for proposals.
"We decided to shake it up a bit and look at some
brands we hadn't looked at," Barth said. "It was an eye-opener for
us, because people want to get into our program."
The number of properties in the JP Morgan Chase hotel
program ultimately increased, but Barth said the cause was the company's global
expansion. "So, in essence, we remained flat," she said.
Garone said this year she decreased the number of hotels in
the Disney program so "all of our suppliers know that we made a concerted
effort to make absolutely sure that if we're receiving good discounts, we're
going to give you the number of room nights we feel that discount warrants."
Like Garone, Barth said New York was one of her most
challenging markets. Latin America was another, although "it was a lower
percentage of our room night usage, so it's not so painful."
In a January research note, Morgan Stanley noted that its
own overall average hotel rate increased by less than 3 percent, below its
expectations of a 4 percent increase. The average New York rate increased
between 2 percent and 3 percent, and the average São Paulo rate rose 10
percent, though the company had braced for increases there as high as 20
Latin America this year was the region where corporate rates
increased most from the prior year, according to Advito. It reported average
rate increases between 8 percent and 14 percent, with average jumps in major
Brazilian markets as high as 22 percent. Part of that was due to currency
fluctuations, but the much bigger reason is that "capacity hasn't caught
up with demand," Brindley said.
The Pacific region, particularly Australia and New Zealand,
also had significant year-over-year rate hikes. Advito reported increases as
high as 12 percent in Australia—though much of that came from big increases in
areas where the mining industry is active, outside such business centers as
Sydney and Melbourne.
In Asia, new supply tempered rate growth to 1.8 percent,
according to CWT. In China and India, where hotel companies in recent years
have concentrated much of their development, the average rates were down 0.2
percent and 3.2 percent, respectively.
Europe, meanwhile, "seemed to be pretty soft in
general," said JP Morgan's Barth. Overall, the average rate in the region
was up 1.1 percent, according to CWT's Abad. Some countries had larger
increases, including France, where the average rate increased 5.5 percent,
largely due to increases at high-end Paris hotels. In London, rates increased 3
percent, he said, where "it's not the usual kind of post-Olympic
The Middle East was the only global region where the overall
average rate decreased, down 1.1 percent, according to Carlson Wagonlit.
"It's still the same issue that we've had in the region
for some years: oversupply and a lot of competition between the hotels,"
Abad said. "Demand is robust, but not as strong as expected some years
ago, when they launched all these hotels."
Despite global rate challenges, buyers this year generally
were successful in retaining key amenities as part their rates. Overall, about
12 percent more hotel agreements than the prior year included Internet access,
Abad said. In Europe and Asia, Internet-inclusive contracts were up 18 percent.
"A lot of hotels had been blocked by contracts they had
with IT companies, where they had to charge for the Internet," he said. "These
contracts are being negotiated, so hotel properties have more flexibility."
At the same time, Abad said hotels, particularly independent
hotels, increasingly are tiering Internet pricing. For example, they will
provide a limited amount of time for free but charge after that, or will allow
basic Internet access but charge for greater bandwidth use.
Disney's Garone said she added a number of "soft
benefits" to her program this year, "including breakfast to about 70
percent [of included properties], in addition to the typical amenities: free
Wi-Fi, discounted parking and discounts on meals."
In the current seller's market, buyers are looking for other
ways to generate savings. Speaking at the December event, Wellpoint manager of
strategic sourcing for travel Cindy Heston said she recently benchmarked with
peers in the healthcare industry and realized her tier mix was at a slightly
higher level than others. As such, she put additional midprice properties into
"We're going to make sure that such properties receive
a certain share in the market, by biasing the booking tool," Heston
explained. "This will ensure value back to the organization, right-size us
with our peers and stay out of the high-end properties from a basic transient
business travel standpoint."
In a webcast conducted last fall by The BTN Group, OSI
Systems director of global corporate travel and expense Frank Dolce said he
found alternatives to supplement his negotiated hotel program and save costs.
Because OSI is a midmarket program, large chains traditionally had been
disinterested in its business, leaving it to direct dealings with local hotels
around the world, he said.
More recently, however, InterContinental Hotels Group
approached the company to join its midmarket program, which lets buyers set up
and manage bookings for properties through an online tool. Dolce said it has
been "working out very well." OSI also has found savings by
reimbursing travelers for AAA memberships.
"A lot of hotels around the world, especially American
chains, offer an AAA rate that can be lower than a consortia rate or a TMC
rate," Dolce said. "It's good for morale as well, because people get
a basic AAA membership out of it."
This report originally
appeared in the February 2013 issue of Travel