The global travel market may be recovering, but resurgent
demand has not yet translated into higher subsistence costs for international
corporate travelers. The 2011 Corporate Travel Index of 100 cities outside the
United States shows the average per diem (consisting of one hotel room night,
three meals and minor miscellaneous costs) is $352, almost unchanged from last
year. In 2010, it was $348. The average room cost is even more stable, down by
$1 to $189.
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BTN's 2011 Corporate Travel Index, featuring
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For the second consecutive year, hotel rates for the index,
provided by Advito, the consulting wing of travel management company BCD
Travel, were based on actual prices paid by its corporate clients. With many
companies reporting they had to concede higher negotiated rates for calendar
year 2011, especially in such high-demand cities as London and Hong Kong,
average paid rates could start to move higher during the coming months. For
now, however, a state of equilibrium prevails: The average room rate in this
year's Corporate Travel Index moved upward in half of last year's 10 most
expensive cities for accommodation and downward in the other half.
The 2011 index, which includes one new international
location, contrasts sharply with the unequivocal hotel buyers' market this time
last year, when only six cities in the entire top 100 posted higher hotel rates
than in 2009. Moscow dropped almost $200 to $309. This year, the Russian
capital is up $2 to $311, enough to once more make it the non-U.S. destination
in 2011 Corporate Travel Index with the highest hotel costs, after it fell to
third in 2010. It is the only city this year with a rate above $300, compared
with three cities in 2010 and 13 in 2009.
As was the case last year, destinations with oil and gas
connections—Moscow, Muscat, Kuwait, Riyadh, Kiev and Stavanger (home to the
Norwegian oil industry)—dominate the list of the 10 foreign cities with the
highest hotel costs. Four of the top 10 are in Western Europe and four in the
Middle East, although the cast of Middle Eastern cities has changed. Out of the
top 10 go Abu Dhabi and Doha, as did Dubai the year before, and in come Tel
Aviv and Riyadh. Kuwait and Saudi Arabia have not indulged in the feverish
hotel-building of their neighbors in Qatar and the United Arab Emirates.
Consequently, rates have stayed high. Riyadh rose from 23rd last year to sixth,
with its average hotel rate growing from to $271 from $242. Meanwhile, Muscat
remains the second-most costly city for hotel rooms, although the average rate
fell to $294 from $316.
In contrast, oversupply in other Gulf states has driven
hotel prices down much faster. Abu Dhabi in 2010 was the most expensive
non-U.S. city for hotel costs, but this year fell to 18th, with the average
rate down to $246 from $322. Dubai last year suffered a similar fate and
dropped again this time, by another $22 to $216.
The other city that exited last year's top 10 is Caracas,
where the average hotel rate is down to $211 from $273. Venezuela is facing
mounting economic problems, including negative growth and a 30 percent
inflation rate, and the value of its currency, the bolivar fuerte, since the
beginning of 2010 has halved against the U.S. dollar. Small wonder that it
slipped in the rankings to 30th from fourth. Another capital city in a country
that has faced economic problems is Dublin, where the average hotel rate fell
more than 10 percent to $153, dropping the city to 84th from 54th.
Meanwhile, several Asian cities have moved in the other
direction. Among those with rates rising in excess of 10 percent are Hong Kong,
to $257 from $229; Shanghai, to $210 from $173; Shenzhen, to $184 from $145;
and New Delhi, to $248 from $212.
Hotel costs, though, account only for a little more than
half of the per diem total in the Corporate Travel Index. When food and
miscellaneous costs are considered, the picture of the priciest cities to visit
changes. In particular, Western Europe looks more expensive thanks to its high
dining costs. It accounts for eight of the hotel top 20 but 12 of the overall
top 20.
On the per diem list, Moscow ranks sixth and Geneva emerges
as the world's dearest city, with a total cost of $526 per day. It is just
ahead of Oslo ($525), while Stavanger is in fourth ($512). Japan is another
country that becomes much more expensive. Tokyo is the 14th most expensive
destination for accommodation, but it's third on the overall list ($516).
Similarly, Osaka is 41st on the hotel list but 15th on the per diem list.
Conversely, the Middle East looks cheaper once food costs are factored in.
Riyadh is 28th in the overall top 100, Muscat 36th and Tel Aviv 67th.
As always, a caveat is required about the food costs,
provided by consulting firm Mercer. Top ranking this year goes to Sydney, with
a total cost for breakfast, lunch and dinner of $244. There is no doubt a
visitor could eat three good meals there for considerably less, but for a
businessperson entertaining three times in one day, the figure is not
unrealistic. Following Sydney on the food cost list are Tokyo ($237) and Oslo
($234).
With only a few exceptions, such as Caracas, costs in this
year's Corporate Travel Index have not been affected dramatically by currency
fluctuations. True, the U.S. dollar has fallen around 10 percent against the
yen in the past year, but it has risen by around the same margin against the
euro and is almost unchanged against sterling.
In terms of how the dollar will perform during the year
ahead, Paul Robson, London-based senior currency analyst for Royal Bank of
Scotland, foresees a mixed picture. He believes interest rates in the United
States will rise during the next six months, pushing up the value of the
dollar, although toward year-end it will weaken again as concerns about the
U.S. fiscal situation intensify.
The dollar's path also will be influenced by pressures on
other currencies. "For the euro, the outlook remains in the balance,"
said Robson. "European Union policymakers may have found a framework to
tackle the weaknesses of some of its peripheral states, such as Greece,
Portugal, Ireland and Spain. However, a lot of good news about the periphery
has already been reflected in the price of the euro, so we think from now on it
will struggle, although not dramatically." At press time, the dollar was
worth €0.71. Robson thinks this could reach €0.80 by the middle of the year
before moving back to around €0.77 by year-end.
Against sterling, Robson expects the dollar in the first
part of 2011 to strengthen to around £0.66 from its early-March level of £0.61,
before falling a bit by year-end. The yen is harder to predict. For several
years it has defied forecasts of a major fall in value, but Robson still
believes one eventually will happen. "Continuing deflation and a weak
economy mean the yen looks very expensive against a wide range of economies,"
he said. "We would expect the dollar to rise fairly steadily against it
throughout 2011." RBS tips a year-end figure of ¥90 compared to ¥82 early
this month.
The dollar's performance against the euro, sterling and the
yen is unlikely in the year ahead to drastically affect international costs.
However, these three currencies now account for a smaller proportion of most
U.S. corporations' foreign travel expenditure than they did a decade ago. Much
of the growth is in Asia (beyond Japan), and on this point Robson raises a red
flag for travel managers. Hotel rates in several Asian destinations rose
significantly in this year's index despite the dollar staying virtually
unchanged against their currencies. Robson thinks exchange-rate movements in
the years to come could add to the problem.
"Generally, where the dollar will struggle most is
against the currencies of Asian countries which have trade surpluses," he
said. "It is likely their currencies will appreciate to slow the economies
down. Countries like China, South Korea and India will become more expensive
over the next one to two years. The days of cheap travel, hotels and food in
Asia are long gone now."
About
These Charts
The 2011 Foreign Corporate Travel Index is based on research
by BCD Travel's Advito Consulting unit and New York-based management consulting
firm Mercer.
Advito provided average upscale daily hotel rates paid in
2010 by businesses. Mercer provided actual January 2011 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.
Mercer 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. 28, 2011.
The roster of cities in this year's Foreign Corporate Travel
Index is identical to the 2010 roster, with one exception: The 2011 Index
includes San José, Costa Rica, instead of Manama, Bahrain.