As Europe faces an economic slowdown and the Middle East and
Africa is impacted by continuing political unrest, business travel costs are
decreasing across the EMEA region. The average business travel per diem in this
year's Corporate Travel Index is down 2.2 percent compared with the prior year.
[Please click here to view the digital edition of the 2013 Corporate Travel Index, featuring all per
diem listings, downloadable as a pdf. Click here for the 2013 Corporate Travel Index methodology.]
Both overall per diems and average daily hotel rates are
down across a significant majority of the 59 EMEA markets covered by this year's
report. The handful of cities that have higher benchmarked costs include
Riyadh, London, Kuwait City, Dubai, Tel Aviv, Barcelona, Nairobi, Warsaw and
Budapest.
According to Bob Brindley, vice president of business
solutions for BCD Travel's Advito consultancy, the "bit of a recession"
in Europe during 2012 "reduced corporate demand. In general, Southern
Europe was weaker than Central Europe, and Northern Europe was on the low end
of that as well."
Food costs in the region are flat year over year, another
sign of a difficult economy.
"Restaurants knew they had to provide more special
offers, and the other factor is that there was a change in minding the T&E
budgets," Brindley said. "[Travelers] were being a little more frugal
when it came to eating."
Currency fluctuations account little for the decline in the
Index. Exchange rates for the euro and several Middle Eastern currencies
virtually were the same as the rates used in the 2012 Index, and the
British pound, Swiss franc and Norwegian kroner each are a bit stronger in the
2013 Index.
The 10 most expensive cities in the region were the same as
last year, though the order changed slightly. Despite a 3.6 percent decrease in
per diem costs, Geneva remained the most expensive city, both overall and in
terms of hotel costs specifically. Oslo; Stavanger, Norway; Stockholm; Zurich;
and Moscow similarly had declines but maintained their order as the next most
expensive cities. A 6 percent increase in hotel rates propelled Riyadh to
parity with Moscow, and a 3.8 percent increase in per diem rates moved London
past Paris and Muscat, Oman.
Food costs dropped 7.2 percent in Oslo, making Stockholm the
most expensive city in the EMEA region for daily meals.
Europe's economic outlook for this year still is uncertain
but is less precarious than last year's. Negotiations for 2013 generally
resulted in a hotel rate range from slightly down to up about 5 percent
compared with 2012, according to Advito. London and Paris both were on the
higher end of that range.
"To be sure, Europe's economy continues to struggle with
austerity, but the concerns of immediate financial calamity have lessened,"
Marriott International president and CEO Arne Sorenson said during a February
conference call with analysts.
Even so, hoteliers in the region are not expecting a rapid
rebound anytime soon.
"Europe remained at a stalemate during 2012, and we do
not expect much to be different in 2013, though Southern European bond spreads
suggest a rise in confidence," Starwood Hotels & Resorts Worldwide
president and CEO Frits van Paasschen said during his company's February call
with the investment community. "Malaise within Europe is offset by demand
for our hotels from outside the region: from the Americas, Asia and the Middle
East."
Within the United Kingdom, London's 2012 rate increases were
driven partially by the Olympics, but the city also has benefitted from
strength in its banking, finance and corporate sectors, according to a Hogg
Robinson Group report issued in January. The glut of hotel openings as a result
of the Olympics could slow rate growth there this year, though Advito's
Brindley said it would be less pronounced compared with the post-Olympics
period in such cities as Beijing.
Elsewhere in the United Kingdom, Liverpool and Aberdeen also
have been seeing rates rise as a result of increased activity in the shipyard
and energy sectors, respectively, according to HRG.
Like Europe, the Middle East's fortunes have varied
drastically within the region. While Egypt and countries bordering Syria,
especially Turkey, continue to see demand suffer amid the unrest, areas along
the Persian Gulf and in Saudi Arabia have done particularly well, according to
Starwood CFO Vasant Prabhu.
In Dubai, where the per diem was up 3.3 percent, according
to the Index, hotels particularly have seen a turnaround after several years of
rate declines.
"With many high-profile hotel projects effectively
mothballed over the past two years, the lack of new capacity has now begun to
squeeze supply," according to HRG. "Several new hotel openings in
quarter four eased the pressure on existing capacity, but issues of
availability are still particularly acute in the long-stay corporate apartment
sector."
Brindley said Dubai and many of the other Gulf cities—Abu
Dhabi, Doha and Kuwait, for example—likely would continue to yo-yo in the
coming years, particularly as Middle Eastern air carriers add capacity,
resulting in increased hotel demand and subsequent hotel supply increases.
Africa, meanwhile, increasingly is becoming a hotbed of
development for hoteliers. At the beginning of 2012, international hotel chains
in their development pipelines for the continent had 208 hotels with more than
38,000 total rooms, according to Lagos-based W Hospitality Group. That room
pipeline was 21 percent higher than it was a year prior.
"Africa is the one region that was left behind by
growth development in the last 20 years, but we see that changing," said
Starwood's van Paasschen. "We have 10 confirmed deals in our pipeline
alongside the 37 hotels we already have open, and we're in advanced discussions
for many more."
That is welcome news to travel buyers with lodging needs in
Africa, as tight supply has kept hotel rates elevated in several of the
continent's major markets. Lagos, added to the Index this year, has the
third-highest corporate hotel rates in the region, for example. This largely
stems from security concerns that give travelers only a handful of high-end
hotels as viable options for stays in the city, according to HRG.
In Nairobi, the per diem increased 6.1 percent year over
year, the largest percentage increase for any market in EMEA, but hotel
development there could bring some relief for buyers. "More than 1,100
rooms are due to enter the Nairobi market before 2014," according to HRG, "but
international business travel to the region is becoming more expensive in real
terms as the local currency appreciates in value."
This report
originally appeared in the March 18, 2013, issue of Business Travel News.