< PrevNext > Hotel Rates Push U.S. Costs By Chris Davis / March 26, 2017 / Contact Reporter Share With year-over-year increases in hotel costs outweighing slight decreases in car rental and dining expenditures, the average per diem across the 100 U.S. cities in BTN's Corporate Travel Index increased 1 percent in 2016.The average per diem was $321.97, compared with $318.80 in 2015. New York City, at a bit more than $549, reclaims its spot as the most expensive U.S. city for business travel per diems. San Francisco led the list for the previous three years but dipped to second place for 2016 at $534.03. Boston is the only other U.S. city to sport a per diem north of $500. Hotel CostsThe average 2016 cost of a hotel room, including all taxes and surcharges, was $177.36, up 2.6 percent from 2015 levels. New York was the most expensive at $385.08, and San Francisco, Boston and Washington, D.C., also exceeded $300.Washington, D.C., in fact, had the largest year-over-year change, with hotel rates up more than 30 percent. Daily hotel costs in Chicago increased 26.5 percent and New York City increased 17.5 percent.Bakersfield, Calif., experienced the steepest decline in daily hotel cost, dropping 5.3 percent to $121.48. A total of U.S. 27 cities showed at least some decline. Corpus Christie, Texas, and Rochester, N.Y., took the next biggest hits with rates falling 4.7 percent and 4.4 percent, respectively. You had, I think, a little bit of an Airbnb impact because prices were getting very, very high [in California]. The demand was still there [in 2016], but the market was just a little but less crazy than it was the year before."Advito's Bob Brindley Three more California cities saw rate drops, as well: Fresno, Sacramento and San Diego. Advito principal and VP Bob Brindley attributed the California changes to market rationalization. "There's some additional capacity. You had, I think, a little bit of an Airbnb impact because prices were getting very, very high. The demand was still there," Brindley said of the hotel market in California in 2016, "but the market was just a little bit less crazy than it was the year before."The effect of Airbnb is but one of the factors that make 2017 a difficult year to assess for hotel costs. Add to it President Donald Trump's attempts, unsuccessful thus far, to restrict U.S. visitation from certain Muslim-majority countries, plus changes in the ratio of hotel rooms to demand.As such, Brindley said, rates in corporate-negotiated hotel programs are up on average from 2016, but not sharply so. "In general, what we saw overall in the sourcing programs for the 2017 season is that it's still a supplier-driven market, but it's not quite as much of a supplier-driven market as the last two years were," Brindley said. "Demand is still growing; it has a slow trend up. There's been a little bit more additional capacity in the market, and that's tempered some of the rate increases."In March, Advito projected U.S. negotiated hotel rates would increase 3 to 4 percent in 2017. Brindley cautioned that, as hoteliers more effectively use revenue management to maximize revenue and limit last-room availability, a comparison of raw corporate hotel rates that companies paid may not reflect the true state of hotel sourcing.Car Rental CostsCar rental suppliers turned up empty-handed in their eternal quest to raise business rates, as the average daily cost of renting a car in U.S. Corporate Travel Index cities decreased two-tenths of a percentage point in 2016 to $48.01. New York led pegged the top rate at $80.25, nearly $20 more than the next city, Rochester, Minn.Brindley attributed the flat pricing to competition among Hertz, Avis Budget and Enterprise, which means 2017 isn't likely to be much different. "From a corporate perspective, we've seen very, very small price changes. Any kind of market-price improvement is offset by a slightly better negotiated rate improvement," Brindley said. "All three of the big providers are … defending their current share. When a client is going out to bid, they're aggressively going after that to either maintain or win share." Dining CostsLast year proved difficult for restaurateurs, and that translated into a 1.2 percent decline in the cost for three meals for a business traveler in the U.S. The average daily dining expenditure across the 100 U.S. Corporate Travel Index cities was $97.59, down from $98.74 in 2015. Honolulu, reliant on imports for food, led the way as the most expensive U.S. city, at $122.89, a few cents ahead of Dallas. Several analysts have warned of a soft restaurant market, and the $766 billion in 2016 U.S. restaurant sales fell short of the $782.7 billion the National Restaurant Association projected at the beginning of 2016. Still, the association projects 2017 restaurant sales to increase 4.3 percent year over year and hotel restaurant sales to rise by the same amount.