BTN's annual answer book for business travel managers.
Renaissance Atlanta Waverly - May 12, 2019
New York City - May 17, 2019
Seattle Marriott Waterfront Hotel - May 21, 2019
Corporate travel costs in the U.S. market are always a puzzle. Rate changes in New York City, for example, do not indicate direction in any other market. Nor do rates in Kansas City or Los Angeles. "It's difficult to make trend assumptions just looking at individual markets," VP of client relationship management for Advito Matthew Patterson said. "They are going to have their own nuances that drive rates within that market." Getting the right perspective is a matter of piecing together the markets important to a particular travel program.
As buyers go through that exercise, however, Tripbam founder and CEO Steve Reynolds said, a promising picture may take shape, at least when it comes to hotel rates in the U.S. "Corporates may be paying a little bit less going into 2019," he said. "Don't swallow the 3 percent increase that every hotel tries to talk you into just because of inflation. [It's] invalid because the rates are down."
That doesn't mean negotiations are easy, and it doesn't mean that corporate travelers are always going to get the rat their companies' travel buyers negotiated either. Tight inventory in high-demand markets will continue to challenge travel managers in 2019, and there are a handful of markets experts recommend watching throughout the year.
BTN's Corporate Travel Index pegged New York, San Francisco and Boston as the most intractable in terms of hotel costs. New York took the top spot with an average corporate hotel booking of $422.82 in the fourth quarter of 2018. While the city has added capacity in recent years, particularly in the midscale category, American Express Global Business Travel VP of hotel value and revenue management Wes Bergstrom told BTN demand is keeping up with supply. GBT's Hotel Monitor 2019, released in August, forecast that hotel rates in the city would increase by as much as 3 percent this year. Bergstrom moderated that view. "It's maybe not as robust as we had predicted," he said, though he maintained buyers should expect more rate growth in the market. That's in line with Advito's experience, which, according to Patterson, held increases for its clients' 2019 negotiated hotel rates to about 1.5 percent in the New York market.
Occupancy in San Francisco will hold strong at more than 80 percent this year, according to Amex GBT. That will keep pricing power on the supply side. Silicon Valley business is flying high, and the reopening of the George R. Moscone Convention Center "will drive more people into the city, where there is not a ton of new supply," Bergstrom said. BTN pegged the average fourth-quarter hotel rate in San Francisco proper at $362.33. But lodging demand in the city creeps well beyond city limits, according to Patterson, and pushes rates in neighboring towns. Nearby Oakland was ninth in the BTN hotel ranking with a $234.96 average cost. San Jose, about 50 miles south of San Francisco, ranked fourth for hotel costs with an average rate of $283.28.
Boston was a challenging market for Advito during hotel negotiation season. Mass transit expansion and more than $7 billion of general construction approved in 2018 will keep Boston a robust market. Amex GBT's 2019 Cities Forecast cited Bean Town's major event venues—the John B. Hynes Veterans Memorial Center and the Boston Convention & Exhibition Center—supporting the strong position of Boston, where the fourth-quarter average hotel rate was $318.53.
Markets to Watch
Amex GBT originally pegged Chicago hotel rates, which ranked eighth in BTN's index, to grow 6 percent over the course of 2019. Demand in the Chicago Loop is strong, but 2019 started off slowly in the city overall. Bergstrom said negotiated rates for the metro area grew between 1 and 2 percent for 2019.
Washington, D.C., could be a very dynamic market. Already flying high at No. 5 in BTN's hotel index with an average rate of $272.68, buyers may need to brace themselves for even higher rates as Amazon sets up shop in nearby Arlington, Va. "Adding a very large company, such as Amazon, to the mix [will] both bring people in for short-term [business] stays and [will drive an influx] of long-term relocation stays," Bergstrom said. Tripbam's Reynolds added that hoteliers might hesitate to offer discounted rates in the market because the burgeoning demand from Amazon will offer an opportunity to get higher rates as the headquarters gets closer to completion.
Amazon also announced an operations center that will bring 5,000 jobs to Nashville, continuing a positive growth story for the city. Erik Shor, VP and officer of partner solutions for Travel and Transport, said some of the travel management company's customers have moved personnel from larger cities to the area. "It is interesting to see how Nashville has evolved over the last three to five years," he said. "For our customers, Nashville has become definitely a key city." He said the boom has made it hard for Travel and Transport to keep hotel rates down in negotiations. GBT's Bergstrom concurred, underscoring that the simple economics of demand and supply is driving rates up in Nashville. He questioned, however, whether those rates will have staying power: "Is it long-term strength? We don't know." Nashville's average hotel rate in the fourth quarter was $211.40.
For our customers, Nashville has become definitely a key city."
Several TMCs and consultancies are keeping their eyes on Texas. Advito reported that Austin's rates could be headed north in the current demand environment. GBT predicted a 2 percent increase in the Texas capital over the course of 2019. Houston is still recovering from the hurricanes of 2017. Bergstrom said the city also has struggled with lower occupancy and sluggishness in the oil and gas industry. Nevertheless, Amex GBT expects Houston's average hotel rate to grow 1 percent this year, even though its rates were slightly depressed in the first quarter.
Charleston, S.C., is safest city in the U.S. for business travelers, according to BTN's Corporate Travel Index, with a GeoSure risk score of just 28, which considers health vectors like water quality and access to medical care, as well as risk to personal safety, probability of property theft and specific incidents of violence or harassment of women or LGBTQ people. GeoSure scores also consider political tensions. Even big cities like Boston and New York show low risk concerns. Forty-four of the 100 U.S. cities indexed by BTN have overall risk scores below 40, indicating low risk. Eighty-seven score lower than 50. For detailed risk scores and more granular per diem data for all cities in the Corporate Travel Index, visit BTN's Corporate Travel Index Calculator.
It's important to remember that BTN Corporate Travel Index rates were calculated on fourth-quarter-2018 data, a shorter term than previous CTIs have used, and that hotel costs will be influenced by seasonality, weather and, in the instance of 2018, uncertainty in the market brought on by a federal government shutdown in the U.S. The impact can be seen in New York's sky-high rates, which Patterson partially attributed to the seasonal influx of leisure travel in the city, making it hard for business travelers to find accommodations. And it can be seen in D.C.'s rates, which dropped in late December with the shutdown.
Shor underscored that hotel market volatility in December was a hiccup, not a trend. January inched back up and February looked strong. Reynolds' peers are mixed on his forecast that rates will lower and travel buyers will realize better negotiating power.
"We could see some uncertainty and some depressed demand in 2020, but so far, the economy appears to be humming along pretty well," Shor said. "Our activity in general is bearing that out." Bergstrom noted that global issues affect the U.S. market, as well. Subdued growth in China and uncertainty around U.S. trade negotiations with the country, for example, could dampen travel to the U.S. "If pieces like that pick up again, it could have an impact as far as overall travel goes," Bergstrom said.