< PrevNext > Limited Hotel Supply Shoves U.S. Per Diems Up By Michael B. Baker / March 23, 2016 / Contact Reporter Share Steep hikes in hotel rates pushed the average U.S. per diem for hotel, rental car and dining costs up 3.9 percent in 2015, and the climb shows no sign of slowing this year.Across 100 U.S. cities, those three categories cost travel buyers $318.80 per day last year, up from $306.91 in 2014, according to BTN's Corporate Travel Index. For the third year in a row, San Francisco was the most expensive city for U.S. business travelers, as its average per diem rose 7.4 percent to $547.34. New York and Boston also surpassed $500.Hotel Rates in 2015The average cost of a room night for corporate travelers increased 5.6 percent year over year to $172.80, but rates grew by a larger percentage in 44 of the 100 U.S. markets in the Corporate Travel Index. Seventeen cities experienced double-digit increases, including Boston (14.3 percent), Chicago (14.1 percent), Seattle (14 percent) and Los Angeles (15.7 percent). Detroit outpaced them all with a 22.5 percent rise as the city builds back from its 2013 bankruptcy. Allentown, Pa., also had a significant increase, 19.2 percent, but smaller cities are more susceptible to shifts in supply mix, said Advito vice president and principal Bob Brindley. A Renaissance hotel opened in Allentown in early 2015, and that likely pushed average rates up.Daily hotel costs totaled $370.78 in San Francisco, but it's still not the most challenging destination, Brindley said. "The southern Bay Area and Silicon Valley are even crazier than San Francisco. You can't get a room in South Bay, and a lot of clients that have facilities there are really struggling."For that area, many buyers have switched to dynamic pricing agreements—negotiating a percentage off best available rate—because last room availability agreements hold little value when rooms are scarce, he added.New York's daily hotel rate for corporate travelers increased a comparatively moderate 7.4 percent to $327.63, placing it behind both San Francisco and Boston's $344.18. New York's recent capacity increases have hindered hoteliers' ability to raise rates there, according to Ultramar's 2016 Business Travel Trends Report.Hotel rates decreased in only 11 of the 100 U.S. Corporate Travel Index cities, seven of those by less than 1 percent.Hotel Rates in 2016In recent earnings calls, executives from Starwood Hotels & Resorts, Marriott International and Hilton Worldwide all reported their corporate negotiated rates for 2016 have increased by mid-single-digit percentages. And while some economic indicators show corporate travel demand could slow, a seller's market appears set to prevail for now.Car Rental Rates in 2015The average corporate car rental rate changed little in 2015, as suppliers struggled to gain pricing traction. Corporate travelers paid an average $47.12 per car rental day, up 0.7 percent. Most of that pittance came from higher taxes; minus taxes and fees, the rate rose a mere 8 cents.In recent earnings calls, executives from both Avis Budget Group and Hertz said 70 percent of corporate contracts negotiated last year came back at flat or higher rates, but they also reported slower-than-expected demand at the end of 2015.Some buyers feared consolidation over the past several years would lead to rate increases, but that has not panned out. "The market is atomized with many different brands because, unlike airlines, major providers aren't sunsetting acquired brands," preventing operational economies of scale, according to Ultramar.Taxes and fees, which are not negotiable, made up more than one-third of the national average corporate car rental rate in 2015. One of Brindley's clients in San Francisco, where taxes and fees made up nearly 60 percent of corporate rental costs in 2015, now requires travelers to take a cab from the airport to an off-airport facility, where lower taxes offset the cost of the cab. "Airports have built expensive, elaborate rental car facilities and now are passing the cost of those on to rental car passengers," he said.Car Rental Rates in 2016Brindley said average rates likely would increase between 2 and 4 percent, but leisure travelers and small and midsize companies operating without contracts would bear most of that. Corporate negotiated rates, on the other hand likely will remain flat, he said.Food Costs in 2015Average daily dining costs in the United States increased 1.9 percent to $98.74. That's not too far off from a 2.5 percent increase in restaurant prices last year that owed to inflation and rising food costs, according to Dinova founder and CEO Vic Macchio. The corporate dining network reported a 7.1 percent increase in 2015 spending, including a 4.5 percent jump in transactions and a 3.8 percent rise in average check value.Corporate daily dining costs in Santa Barbara, Calif., lurched upward almost 26.9 percent to $131.77, pushing it past import-dependent Honolulu, where costs shrunk 1.2 percent, as the most expensive city in the United States for dining. Costs also rose in Washington, D.C., San Francisco, Hartford and Las Vegas, pushing them all above New York, where meal costs grew just 0.1 percent.Food Costs in 2016 The National Restaurant Association projects $782.7 billion in sales this year, up 5 percent. "Outside of small pockets here and there, the environment is quite robust," Macchio said.