Editor's Note: The following is an overview of the international results of Business Travel News' 2008 Corporate Travel Index, an annual compendium of the daily costs of doing business in 100 U.S. cities and 100 international cities. BTNonline subscribers may download the entire 2008 Corporate Travel Index, including a similar article on domestic costs and listings of per diems for 200 cities, here.Buyers of a nervous disposition may find
Business Travel News' 2008 International Corporate Travel Index disturbing. With average per diems across its 100 cities up 11 percent in 2007—which also was an expensive year—it does not make for happy reading.
As was the case in 2007, the twin culprits are rising hotel and food costs compounded by further weakening of the U.S. dollar. As a consequence, no fewer than 17 cities have returned a per diem of more than $400, compared with seven last year.
Fortunately, there is some cause for optimism amid the gloom. At press time, the dollar had stabilized against the euro at €0.67 for three months, and appreciated against the pound to £0.51 after hitting a low of £0.47 in November 2007. Furthermore, some currency analysts believe the worst is over for the much-buffeted dollar.
"It doesn't look the dollar is going to make the world a tougher place for U.S. travelers in 2008, and it may even become a little cheaper," said Paul Robson, a foreign exchange strategist with the Royal Bank of Scotland in London.
For now, however, the pain is acute, as these figures show. They consist of average hotel rates negotiated by corporate customers of BCD Travel and collated by its Advito consultancy wing, combined with the cost of three meals in the same city from Organization Resources Counselors.
The figures show that rising travel costs are worst in Europe. The continent accounts, for the first time in this report's history, for all 10 of the priciest destinations in the top 100. In the top 20, only Bangalore, tied for 14th, and Seoul in 18th are from other parts of the world.
Top of the heap this time is Paris at $528, followed by Amsterdam at $506. The Dutch capital narrowly edges Moscow, the most expensive city in 2007, into third place. Moscow is one of only a handful of destinations that are cheaper this time than last, down from $510 to $505, although at $367 per night its hotels remain the priciest in the world.
Whichever way the cake is cut, the figures cannot be made to look much better. The average rate across a basket of 10 of the most important business destinations on the list—London, Paris, Moscow, Frankfurt, Brussels, Toronto, Tokyo, Dubai, Shanghai and Mumbai—is $356.90, compared with $317.20 last year. The average across all 100 cities has risen from $281.87 to $314.08.
Many of the steepest rises are in northern Europe. The resurgent German economy has assisted Frankfurt in its jump from 21st place to 11th, with the per diem rate rising from $354 to $433.
Oslo is also a steep climber, with a $96 increase to $478 taking it up the table from 12th position to sixth.
Outside Europe, the figures are less frightening. The Americas in particular are ranked much lower than five years ago. Only two cities—Rio de Janeiro (32nd, $354) and Calgary (49th, $310)—grace the top 50, while the per diem for bottom-placed La Paz ($109) is so cheap that five travelers could spend a night there for almost the same price as one traveler in Paris.
Other cities in the bottom 10 are oil-less Middle Eastern locations—Cairo, Amman and Damascus—and three from Asia: Guangzhou, Hanoi and Kuala Lumpur. At $192, Guangzhou is considerably cheaper than China's two big destinations—Shanghai ($306) and Beijing ($253)—but it is one of numerous conurbations in the country where experts expect travel to quickly accelerate in the next decade.
If one examines only hotel figures, the gap between Western Europe and the rest of the world is less stark—or, rather, it becomes clear that there are rate hotspots in other regions. As was the case last year, Eastern Europe is particularly expensive, with Moscow in first place and Kiev only $3 cheaper at $364. Also in the top 20 hotel rates are the Slovakian capital of Bratislava (8th, $270) and St. Petersburg (11th, $255).
Another hotel hotspot is India. Bangalore takes the third position with $337, while Mumbai ties for 13th ($248) and New Delhi falls in 15th ($244).
In all the above-mentioned cities, there are cheaper accommodation alternatives, but little in the three- or lower four-star range. It means companies have little realistic alternative to placing their personnel in the most expensive properties, and demand in these is high while supply is low.
The Middle East also needs watching for similar reasons. Kuwait's hotel average is $240, putting it in 17th place, followed closely by Doha in 19th and Dubai—which some other surveys place among the world's top five for hotel rates—tied for 27th.
The pace of hotel building in the Middle East, especially in the Persian Gulf, is furious, but so too is the boom in visitors, and demand is expected to continue to outstrip supply during the next few years. In this year's per diems, Dubai is up from the 42nd position to the 26th.
In many of these cities, the saving grace is that food is considerably cheaper. For example, Bangalore only ranks 87th for dining costs, with three meals in a day totalling $70. It is a similar story for the Eastern European destinations. Kiev is tied for 73rd with a total dining bill of $86.
At the other end of the scale, several cities in Western Europe are expensive for both accommodation and dining. Indeed, the 10 priciest cities for food all are in this region. Amsterdam tops the list at an astonishing $250 per day, followed closely by two French cities: Paris ($248) and Lyon ($245). When broken down by individual meal, these three cities share the bread roll of honor between them. Paris is costliest at breakfast ($55), while at lunchtime it is Amsterdam ($72), and in the evening, Lyon ($150).
However, these meal prices are best sampled with a pinch of salt, since they represent establishments at the top end of the pricing scale where senior management might entertain clients. A business traveler dining alone in Amsterdam can enjoy an excellent Indonesian
rijst tafel for $40, or a three-course fixed price menu for the same price in Paris.
For bargain hunters, La Paz is the best value in the top 100 for breakfast, lunch and dinner at $3, $6 and $14, respectively, just as it was for accommodation. That means, according to these figures, that 10 travelers could eat dinner in the Bolivian capital for less than one traveler in Lyon.
Predicting what will happen to per diems in the year ahead is not easy. Growing economic concerns have not yet translated into a dip in corporate travel volumes, and there remains chronic undercapacity in expensive cities like Moscow, Paris and Bangalore. Furthermore, hotels, much as is the case for airlines, are under pressure to raise rates because of higher costs for fuel and other raw materials.
On a brighter note, Royal Bank of Scotland's Robson is optimistic that the dollar has reached the limit of its decline.
"A lot of bad news is already priced into the dollar," he said. "We know the U.S. economy is slowing, and the Fed [U.S. Federal Reserve] has cut interest rates and will continue to do so. There is not a lot more that can hit the dollar. If anything, once the sub-prime and credit worries start hitting other economies, it could move the other way. We suspect U.S. economic growth will trough out and then accelerate again in six to nine months. Investors might want to reward the dollar for that."
In terms of the dollar's relation with sterling, Robson said much will depend on whether the Bank of England cuts interest rates to reinvigorate the U.K. economy or keeps them where they are to curb inflation. On balance, he believes the exchange rate will remain where it was at press time, in the region of £0.50 to £0.52.
Against the euro, Robson expects a gentle climb to around €0.71.
"Our forecast is largely predicated on the idea that the European Central Bank will cut rates, which could be as early as April," according to Robson.
Two currencies against which Robson expects the dollar to be less successful are the Japanese yen and the Swiss franc. Both are considered safe, non-volatile havens in uncertain economic times, which means investors now are buying into them.
"The current level of ¥108 looks a little expensive," according to the Royal Bank of Scotland's Robson. "We expect the dollar to drift lower this year to ¥103 to ¥104. The Swiss franc will appreciate against the dollar for a similar reason."
METHODOLOGYThe 2008 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 2008 average accepted negotiated upscale daily hotel rates. ORC provided actual 2007 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 last December.