New York—Despite an uncertain
economy, chief executives of several global multibrand hotel companies said
their sales teams later this year would push for corporate transient rate
increases in the high-single-digit percentages when 2012 contract negotiations
commence.
Speaking here Monday at a press
conference at New York University's Hospitality Industry Investment Conference,
Hilton Worldwide president and CEO Christopher Nassetta said his sales team
this week would begin discussing strategy at its national sales conference. High-single-digit
percentage rate increases "are where it ought to be," he said, "given
the base of demand we have on the books, particularly very strong group demand
for next year."
Incoming InterContinental
Hotels Group CEO Richard Solomons concurred that increases at that level "would
be great," though he said market share also would be a priority in
negotiations. IHG will continue to promote a dynamic pricing model, which
Solomons said has improved market share, and attempt to shift corporate travel
to the recently revamped Holiday Inn brand.
Starwood Hotels &
Resorts Worldwide president and CEO Frits van Paasschen said he expected
corporate travel to continue growing during the coming months, which should
give hotels more edge in negotiations. "U.S. companies today are
extraordinarily strong in terms of their balance sheets," he said. "They're
looking at opportunities to grow, get out and travel. With that kind of
increase in demand, and supply being constrained for some time to come, it's going
to be a great rate environment."
The CEOs said returning
group business also is boosting occupancy, leaving room for rate growth.
Nassetta said group travel to Hilton properties is showing "no signs of
weakness," while van Paasschen said business for this summer is coming
without the discounting seen in previous years. As a result, CEOs said they
expected the group booking window to again expand.
Much still depends on
economic conditions this summer. While economists at the conference said the
chance of the United States sliding back into a recession is slim, they suggested
it would be shaken both by the high unemployment rate and such global events as
unrest in the Middle East and possible debt defaults by the governments of Greece,
Portugal and Ireland. Economic growth, they concluded, is likely to continue
but at a tepid pace.
Oil prices also have the
potential to eat away at demand. In a new report, PKF Hospitality Research
noted that hotels will see only minimum disruption if oil reaches $125 a barrel,
but prices above $150 would severely curtail the industry's recovery.
Increasing airfares—pressured
upward by limited airline capacity growth and rising oil prices—also might
force some corporations to reevaluate their travel budgets, particularly for the
internal meetings that hotel executives said had begun to return, said Adam
Weissenberg, leader of Deloitte & Touche's hospitality and leisure sector. He
expects corporate rates therefore to ultimately fall short of the CEOs'
expectations.Those expectations, Weissenberg said, seem "relatively
aggressive when you look at some of the RevPAR numbers in terms of overall
growth. There will be increases overall in corporate rates for the upcoming
year, but I'm not sure how high they will be."
Nevertheless, the CEOs said
they expected rates to trend higher for the next several years. With financing
difficulties constraining supply growth, Nassetta called the gap between low supply
growth and high demand growth globally the most favorable he'd ever seen.
"As long as the
economies around the world have a global GDP growth of 4-plus percent, nobody
is building except in a few select places around the world and demand globally
is going up much faster than anyone can add supply, you're going to get
increasing RevPAR growth by rate."
Even if hotel companies tomorrow
began building heavily, it would be several years before those hotels were
completed, forestalling meaningful supply growth by two to four years, van
Paasschen said. "If you don't like your airline prices today, you really
aren't going to like your hotel rates in about three years," he said, "unless
you’re one of us."