This year's Corporate Travel Index shows a major
geographical shift in gravity of the list's most expensive cities. Last year,
seven of the top 10 destinations for hotel rates were in Western Europe, but
this year, there are only two: Geneva in sixth, and Paris in 10th. Instead, the
new global accommodation pain point is the Gulf. It has no fewer than four of
the top 10 cities: Abu Dhabi at the top with $322, Muscat in second at $316,
and Doha and Kuwait tied for seventh at $267.
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and per diem listings.
However, it would be even more accurate to say the top 10 no
longer is defined by geography but by sector. Along with the four Gulf locales,
three more cities in the top 10 have strong ties to the oil and gas industry:
Moscow, Kiev and Caracas. Not only is demand high in all the oil and gas cities,
but supply remains a problem. They are well-represented in the five-star
property bracket, but tend to have far less room stock below that tier that
would be acceptable to a business traveler. In Western European countries, by
contrast, there has been significant expansion in budget accommodation of an
acceptable standard for business travelers in recent years, which has helped
contain average room rates.
This year's Corporate Travel Index for the first time bases
its hotel figures on actual rates paid rather than those booked or negotiated
by corporate clients. This advancement in data quality was provided by Advito,
the consulting wing of global travel management company BCD Travel, the
longtime provider of hotel data for this index.
Advito also has provided comparative figures for the
previous year that show just how dramatically accommodation costs have fallen
in 12 months. Last year, BCD Travel clients paid an average $224 per night in
the top 100 cities. This year, it is $190.
Looked at another way, a night's hotel accommodation cost
north of $300 in 13 cities last year. This time, it only costs that much in
three cities.
Although oil and gas cities dominate the top 10, they have
experienced mixed fortunes over the past year. Caracas, with the list's sharpest
increase at 14 percent, Abu Dhabi, up 7 percent, and Doha, up 4 percent, belong
to a select list of only six cities in the top 100 that have experienced rate
rises. The other three were Nairobi, up 9 per-cent—finally recovering after
civil unrest caused a disastrous visitor slump in 2008—Mexico City, up 5
percent, and Sao Paulo, up 2 percent.
On the other hand, Moscow saw its hotel rate slump 39
percent from $505 to $309. This was the biggest percentage fall in the Index,
but the Russian capital slipped only as far down as third in the table from its
top position last year. Similarly, Kiev is 25 percent cheaper this year at
$288, but has only slipped from second to fourth.
Three other cities experienced rate tumbles in excess of 30
percent, and all three are Indian: Delhi, down 32 percent, Mumbai, down 36
percent, and Bangalore, down 35 percent. In addition to general rate deflation,
these cities have gone some way during the past 18 months to redressing
critical supply shortages, and the Mumbai massacres of November 2008 may well
also have been a factor.
The Gulf region's rates have been least affected by the
downturn. Not only are Abu Dhabi and Doha up, but almost all other cities are
down only by single-digit percentages, which can be considered an achievement
in the current climate. The principal exception to this is Dubai. The
spectacular and well-documented halt to its overheated growth, which had
included a frenetic outburst of luxury hotel construction, led to rates
plunging 26 percent to $238.
Western Europe has had its share of rate decline too. Its
international gateway cities are clustered between the 10th and 30th position
on the list of hotel rates, with prices down by double-digit percentages,
including London, down 24 percent, Paris, down 10 percent, Frankfurt, down 14
percent, and Amsterdam, down 20 percent.
When food and miscellaneous costs, such as taxi rides and a
newspaper, are added to hotel rates to provide a per diem total, the big
Western European cities move up the top 100 significantly. While the Advito
hotel rates are based on actual rates paid, the food figures, which are
provided by the consulting firm Organization Resources Counselors, are more
representative of the prices that would be paid to eat three full meals at some
of the best dining establishments in the city. To take the most expensive
example, daily food costs for Amsterdam are listed as $256, but a business
traveler can eat very well there for much less than that. On the other hand, if
they are wining and dining clients three times a day, $256 per person is an
all-too-feasible sum to pay.
With that in mind, Western Europe accounts for 13 of the
most expensive 20 cities in the top 100 per diems. Paris leads the way at $526,
followed by Oslo at $508, both more than three times more expensive than
Guatemala City, down in last place at $165. They illustrate what a difference
food costs can make to travel managers' budget reckonings, because Paris is
only the 10th most expensive city for hotel rates and Oslo 25th. Conversely,
Abu Dhabi, which is down at 58th in the food table, slips to 12th in per diems
and Muscat to eighth.
Wherever business travelers happen to be picking up a knife
and fork or resting their weary heads, one factor that has had less influence
than usual on the final bill is the health of the U.S. dollar. Although there
have been some ups and downs, the dollar has ended pretty much where it was a
year ago, despite the financial turbulence raging around it.
Paul Robson, a senior foreign exchange strategist with Royal
Bank of Scotland in London, tips the U.S. dollar to fare moderately well
against the other three traditional currency giants—the euro, sterling and the
yen—for the rest of 2010. He expects all four to struggle against most others.
Starting with the euro, said Robson, "Currently, there
are worries about Greece and the euroland project in general, which means money
is flowing back to the dollar after flowing out for the last five years. What
happens over the next year will depend on how the euroland countries,
particularly the economies of its Mediterranean member states, perform, and
also on U.S. interest rates. If the Federal Reserve starts to raise interest
rates this year, that will tend to support the dollar, because capital goes
where interest rates are highest, and the U.S. is expected to raise its rates
before Europe or Japan."
Robson thinks the dollar will benefit in the short term
simply by virtue of not being the euro, then keep rising in anticipation of a
Fed interest hike. However, the increase will not be dramatic. Robson sees the
dollar rising to $0.78 against the euro by the end of 2010, up from $0.73
earlier this month.
Meanwhile, the pound is under pressure ahead of a general
election in the United Kingdom in May. Robson believes the fundamentals of the
British and American economies are too similar at present to fuel significant
medium term movement. "Both have weakened financial systems and are
overleveraged," he said. "With the Fed likely to raise interest rates
before the U.K., the dollar is likely to do well against sterling, but the
pound is undervalued at the moment, so overall there will be little change."
He predicts a year-end rate of £0.62 or £0.63, from £0.66 earlier this month.
Robson sees most hope for the dollar against the yen. "The
yen has a lot of challenges ahead," he said. "It is very expensive
for Japanese industry and the country's economy is lagging as a result, which
means interest rates will not rise. The yen will be the weakest currency over
the next 12 months." However, he warns that the dollar, yen, euro and
pound will struggle against other currencies in Asia and in Australia and
Canada. These countries have not fared as badly in the recession. Said Robson, "We
are already seeing a lot of money flowing into the Canadian dollar because it
has a much stronger economy than the United States."
Methodology
The 2010 International Corporate Travel Index is based on
research by BCD Travel's Advito Consulting unit and Chicago-based management
consulting firm Organization Resources Counselors Inc.
Advito provided 2010 average paid upscale daily hotel rates.
ORC provided actual 2009 menu item costs for hotel continental breakfasts,
lunches of sandwich, salad and nonalcoholic drink and dinners of a fish, chicken or beef entree, salad and a
nonalcoholic beverage.
ORC also provided miscellaneous lodging expenses of two taxi
fares, a newspaper, a bottle of water and a magazine. Local prices in 100
non-U.S. business destinations were converted to U.S. dollars using rates from
Jan. 8, 2010.