Buyers are facing hotel rate increases in 2011, particularly
in the northeastern United States, but analysts said hotel rates still have
several years before they return to pre-recession levels.
Average daily rates will increase overall in North America,
Europe and Asia/Pacific, with the exception of a few markets, forecasts travel
management company Egencia. Most projected increases are 5 percent or lower,
with the exception of Minneapolis, Seattle and Washington, D.C., in the United
States, as well as Glasgow, Scotland. "We expect fairly level ADRs, and no
dramatic price increases," said Noah Tratt, Egencia's vice president of
supplier relations for the Americas. "More demand means higher prices, but
large group meetings and incentives have not recovered yet."
A few North American markets will see rate decreases,
including Houston, Phoenix, Calgary and Vancouver, according to the report.
Moscow, which in the past several years has been the most expensive city
globally for hotels, will see a 7 percent rate decrease, providing a "strong
opportunity" for travel buyers, Tratt said.
Carlson Wagonlit Travel, meanwhile, said buyers could expect
significant increases in negotiated rates in the Northeast, particularly in
Boston and New York. The agency projects rates in the region to be about 12
percent higher, and in upper upscale and luxury properties, those increases
could be as high as 20 percent, said Mauricio Molina, leader of CWT's hotel
consulting group.
"Even though that 20 percent rate increase seems to be
large, it's a compensation for what they've taken away," Molina said.
As a result, many buyers who had become more lax on
hotel-tier requirements for travelers—letting travelers stay in upper upscale
and luxury properties, for example, because they were comparable to midprice
rates—will once again enforce tiering-down strategies in their program, Molina
said. Buyers who maintained those policies during the downturn certainly are
unlikely to become more lax with them, he said.
Looking further ahead, lodging consulting firm HVS in late
September issued a forecast predicting year-over-year rate growth through 2015
for U.S. hotels along with "stabilized levels of operation" by 2014.
While HVS projects that 2010 will end with overall rates down 1 percent from
2009 levels, it forecasts them to be up by 4.5 percent in 2011. In the three following
years, HVS said rates would grow by at least 5 percent each year, which means
they would top 2008 levels by 2013.
HVS also projects steady occupancy growth before stabilizing
at 62.7 percent in 2014, and said business travel and group travel would
strengthen in 2012 and 2013, as employment levels increase.
Even without widespread dramatic rate increases, Egencia's
report indicates a weak hotel negotiating market for buyers in most major North
American markets, with Houston the only market in the United States marked as a
strong negotiating opportunity.
For example, average daily rates in August in New York
increased 11.8 percent year over year, according to Smith Travel Research, top
among major markets. "Pricing power is expected to come back in the major
markets and expand broader to the smaller markets," STR president Mark
Lomanno said in a statement.
Despite that, buyers to this point are not having trouble
negotiating last-room availability into their programs without a premium,
Molina said. "Even today, occupancy rates are just slightly up, so it's
not really rosy for hotels, yet," he said.
Molina said CWT also is encouraging buyers to pursue
two-year hotel contracts. Some buyers have locked in rates for two years, and
others' rates are set to increase by an agreed-upon level for 2012, he said.
Europe is more of a mix, with buyers facing tough
negotiations in Amsterdam, Paris, Frankfurt and Madrid but more moderate ones
in London, Brussels, Berlin, Dublin and Stockholm, according to Egencia. Overall
European hotel rates were about €10 below their levels in August 2009, even
though corporate and group travel has begun to pick up, according to STR Global
managing director Elizabeth Randall.
Buyers also will face tough negotiations in nearly all key
Asia/Pacific cities, Egencia said. Rates there increased by 10 percent year
over year in August, while occupancy increased by 5.8 percent, according to STR
Global.
This report appeared in the Oct. 11, 2010, edition of Business Travel
News.