While destinations around the globe post double-digit percentage room rate increases--in spite of global economic uncertainties--the year-over-year increase in rates paid by corporations dropped to 5 percent in the second quarter from 7 percent in the first quarter, according to Hogg Robinson Group. However, as companies enter the hotel negotiating fray, considerations of travel spend cuts could hinder their clout and cause corporate rates to rise. To account for that, many buyers are seeking to include various services and amenities that make preferred rates more valuable.
"The hotel industry has continued to show an increase in hotel rates, albeit at a slower rate than we saw for the same period in 2007," according to Margaret Bowler, HRG director of global hotel relations. "However, as the market softens we can expect to see more hotels adopting sensible pricing in order to maintain current occupancy levels."
Some key markets in Europe are exhibiting strong growth, HRG reported in a hotel study covering the first half of 2008that used both industry statistics and actual rates paid by U.K. clients to determine market changes. At 39 percent (as measured in British pounds sterling), Berlin racked up the highest average daily rate increase compared with the same period last year. Geneva's increase was 31 percent, and Munich's was 25 percent. Moscow also maintained strong growth, with a 25 percent rate increase. In London, however, rate growth was sluggish at 2 percent, dropping the city off the list of the world's 10 most expensive. HRG said London's "slowdown" was due to "solid supply" and "steady demand."
Elsewhere, Abu Dhabi's average daily rate increase was 23 percent, pushing it into the top 10 most expensive cities. Mumbai rates jumped 37 percent, and Singapore's rose 30 percent.
U.S. cities saw average daily rates increase more slowly or decline. New York City's average daily rate in the first six months of the year, for example, was flat compared with the year before, according to HRG. Houston and San Francisco showed rates (measured in U.S. dollars) that declined 3 percent and 2 percent, respectively.
Such rate decreases, which ultimately would benefit travel buyers during the 2009 hotel rate negotiation season, can be the result of lower revenue per available room, according to Deloitte Touche Tohmatsu. Citing Smith Travel Research figures, Deloitte found that North America was the only region that did not produce double-digit percentage RevPar growth for the first six months of 2008.
Alex Kyriakidis, Deloitte global managing partner of tourism, hospitality and leisure, said the strong growth in most regions "is a great result for the industry given the current economic uncertainties facing the global economy."
Marriott International, Starwood Hotels and Resorts and InterContinental Hotels Group each said they hope to minimize dependence on the U.S. market as the U.S. economy stays weak and focus on generating more revenue from stronger markets in other regions.
That focus coincides with lower travel spending at many U.S. organizations. According to an April Deloitte survey, 65 percent of CFOs said they were "likely" to cut funding for such "discretionary" expenses as business travel and entertainment.
Even so, travel buyers are trying to make the most of their hotel programs. Starwood senior vice president of global sales Christie Hicks said the hotel company during the downturn will be looking to strike compromises with corporate accounts by offering more value-adds, including bottled water in the rooms, free breakfast and gym passes. Hicks noted that free Internet access, however, has become less important for some buyers as many travelers carry laptops and mobile devices that connect independently.
"Value-adds are going to play a higher priority this year than they have in years past, even more so than rate," Hicks said. "Travelers and businesses understand that there are costs involved, but everyone wants to feel as though they are getting value. From a corporate travel manager's perspective, they need to demonstrate the value that they bring to their company."
Universal Music Group senior director of travel services Pamela Witherspoon agreed that free Internet access is not a top priority for her organization, but other items--bottled water, waived early departure fees and free breakfast--are. "There is a general consensus there is going to be more value with the rates," she said.