Business Travel per diems increased year over
year in all but a handful of European markets, according to the 2014 Corporate
Travel Index, as the region's economy defied earlier expectations and began to
recover. Business travel costs generally are up in the Middle East and Africa
as well, although volatility in various sub-regions has made the landscape
there a bit uneven.
[Please click here to view the digital edition of the 2014 Corporate Travel Index,
featuring all per diem listings, downloadable as a pdf.]
Overall, the average per diem in Europe, the
Middle East and Africa increased by 1.9 percent year over year to $391. Of the
59 EMEA markets measured in the 2014 index, the average per diem increased in
45 of them.
The 10 most expensive cities in the region are
the same as in the 2013 index, albeit in a slightly different order. Geneva
remains the most expensive city in the region for business travelers and the
second-most expensive in the world, with its per diem up 1.5 percent to $547.
Both food and hotel costs moderated a bit in Oslo, dropping it from second in
2013 to seventh this year. The second-most expensive city in the region,
Stockholm, had fairly steady average hotel rates, but daily meal costs
increased by 5.2 percent to $243, making it the most expensive city in the
world for food. Higher daily hotel costs pushed London up to the fifth-most
expensive city in the region, up from eighth in 2013, while lower hotel costs
dropped Moscow from sixth to 10th.
Riyadh and Muscat remained the only two
non-European cities in the top 10.
Europe Recovers
Hoteliers began 2013 with some unease regarding
European performance, but the region ended the year with demand up 3.3 percent
compared with 2012, according to STR Global. The average daily rate in the
region remains below prerecession levels, STR Global added, but hoteliers
expect to make up ground in that metric this year.
"Europe surprised us by not falling apart,
as many were predicting last year," Starwood Hotels & Resorts CFO
Vasant Prabhu said in February during the company's fourth-quarter earnings
conference call. "While European economies remain fragile and the euro
could still be an issue, we're hopeful that the improving trends will continue.
Occupancies are continuing to rise, and rate growth could accelerate since
we're reaching peak occupancy levels across Europe."
STR Global manager of marketing and analysis
Naureen Ahmed noted that average rate and occupancy growth in Southern Europe
was "one of the pleasant surprises of 2013," although that growth was
from a relatively low base.
Hogg Robinson Group's annual hotel survey,
released in February, reported that most of the rate and occupancy growth is
being driven around convention activities. Starwood president and CEO Frits van
Paasschen said incentive travel also is on the rise in Europe.
Even so, the major hotel companies are staying
conservative in their expectations for rate and revenue growth in Europe this
year, particularly considering political turmoil both in the past—last year's
protests in Istanbul, where the per diem was down 1 percent, for example—and
the present, particularly the conflict between Russia and Ukraine.
"There are places of significantly greater
optimism than the year ago, but you have places like Paris, which are lagging,
and we'll have to see how Istanbul performs," Marriott International
president and CEO Arne Sorenson said during the company's fourth-quarter earnings
call. "I would be cautious about being too bullish on Europe before we've
got a little more evidence to support that bullishness.”
On the individual market level, Rome had the
largest year-over-year per-diem increase in the EMEA region and the
second-largest increase in the world. Rome's per diem increased by 18.8 percent
to $309, bumping it from the 24th-most expensive city in EMEA last year to the
14th-most expensive this year. Daily meal costs in Rome were up 13 percent to
$165, and average daily hotel costs were up 22.1 percent to $284.
Rates and demand are projected to remain high
in Rome amid an influx of visitors since the beginning of Pope Francis' papacy
a year ago, according to HRG.
Outside of Rome, Europe's largest per-diem
increases were in Stuttgart (up 11.3 percent to $174) and Milan (up 10.9
percent to $280). Stuttgart's hotel rate was up a modest 2.9 percent, but its
average daily meal cost was up 22.1 percent, a bigger increase than anywhere
else in the world. In Milan, the hotel rate was up 12.8 percent and meal costs
were up 7.8 percent.
Other European markets with per-diem increases
of more than 5 percent included Grenoble, France (6.6 percent); Düsseldorf (6.2
percent); Luxembourg (5.6 percent); Vienna (5.4 percent); and Lisbon (up 5.3
percent). Besides Istanbul, Oslo and Moscow, the only European cities in which
per diems decreased were Budapest (down 0.1 percent), St. Petersburg (down 0.5
percent), Glasgow (down 1.3 percent) and Birmingham, U.K. (down 2.4 percent).
Even in the most expensive European cities,
overall hotel rates tend to be more volatile than in the United States, said
tripBam president and founder Steve Reynolds, who has collected data on rates
in those cities via his hotel shopping and booking tool.
"The brands try to put as much rate
control out there as they can, but not as many of the hotels there are members
of a major chain," he said. "The average hotel rate in London or
Paris is crazy expensive, but there's also a greater opportunity for
savings."
Even so, the major hotel companies are
fortifying their brands' presence in Europe, particularly among their midprice
and select-service brands and in such budding markets as Russia and the CIS
countries, including Kazakhstan and Tajikistan.
Marriott, for example, signed development
contracts for a record 5,600 rooms in Europe in 2013, on top of 2,400 rooms it
opened in the region last year, Sorenson said. In particular, Marriott is
focusing on its new Moxy brand, an economy brand developed in conjunction with
Ikea specifically for the European market. Marriott plans to open 150 Moxy
properties in Europe within the next 10 years.
Starwood this month announced plans to open 60
new hotels in Europe during the next six years, a total of about 40 percent
more rooms than its current portfolio there. Its midmarket brands Aloft,
Element and Four Points are on track to double their presence in the region by
2016 with 12 hotels under development in such markets as Amsterdam, Kiev,
Liverpool, Munich, St. Petersburg and Stuttgart.
Hilton Worldwide also has ambitious development
plans for Europe, particularly with its Doubletree, Hilton Garden Inn and
Hampton brands, which it customized for European markets, president and CEO
Christopher Nassetta said during the company's fourth-quarter earnings call.
"We've gone from three non-Hilton or
Conrad-branded hotels in 2007 to more than 200 either open or in the pipeline
at the end of 2013," he said. "Today, we have nearly 30,000 rooms in
our European pipeline and more than 16,000 under construction, more than twice
as many as our nearest competitor."
Middle East, Africa: A Mixed Bag
Although hotel rates generally have been on the
rise in the Middle East and Africa, per diems in the Corporate Travel Index are
a mix of ups and downs.
The region's largest per-diem increases were in
Tel Aviv (up 6.9 percent to $313) and Kuwait (up 5.3 percent to $334). Per
diems also are up in Muscat (1.2 percent), Abu Dhabi (1.6 percent) and Dubai
(0.4 percent).
The average hotel rate in Dubai increased by
3.6 percent to $236. Although the city had seen rate declines in recent years,
its rate of new hotel openings has slowed while business travel has increased,
according to HRG. Even so, Dubai likely will be looking to double its hotel
supply during the next several years in preparation for Expo 2020, which it was
awarded at the end of last year, according to STR Global.
The per diem in Doha, which has seen
significant supply growth in recent years, declined 3.2 percent to $329, the
largest decline in the Middle East. HRG noted that supply growth in Abu Dhabi
soon could lead to weakening rates there as well.
Riyadh remained the most expensive city for
business travel in the Middle East despite a 1.2 percent decline in its per
diem to $333. Saudi visa restrictions during Ramadan and the annual Hajj
pilgrimage to Mecca, instituted last year slowed the country's visitor flow,
Starwood's van Paasschen said.
Meanwhile, per diems declined in every African
city measured by the Corporate Travel Index. Cairo, where the per diem declined
2.3 percent, continues to face political unrest. Nairobi, where the per diem
declined 1 percent, is seeing growth in business travel but also recently has
opened about 1,000 new hotel rooms, according to HRG.
Two South African cities had the largest per-diem
declines for the entire EMEA region: Cape Town (down 11 percent) and
Johannesburg (down 13.7 percent). Exchange rates have negatively affected both
cities, but Johannesburg also has seen declining corporate demand amid growing
supply, HRG reported.
Even so, the booming oil business in Africa and
limited hotel supply acceptable for business travel has given the continent
some of the highest hotel rates in the world, HRG added. Hotel companies are
working to keep up with that demand, particularly Marriott, which next month
plans to close a deal to acquire Protea Hospitality Holdings, giving it more
than 10,000 rooms, largely in South Africa.
This report originally appeared in
the March 17, 2014, issue of Business Travel News.