Hotel rates are rapidly rising across much of the world, according to two new hotel industry surveys. Properties in major European destinations reported average rate growth between 10 percent and 18 percent for the first six months of the year, according to an HRG survey. Another report, by Smith Travel Research and The Bench, showed that average daily rates in Europe in July jumped by an average of 20.7 percent year-over-year, while occupancy rates remained steady.
Europe remained the most expensive region for travelers, and Moscow was the world's most expensive city, with average room rates up £16.06 (US$32.39) to £236.03 (US$475.72) from July 2006, according to the HRG survey, which was based on "a combination of industry figures, actual room nights booked and rates paid by its U.K. clients." Mumbai reported the fastest-growing ADR, with an increase of 30 percent for the first six months of 2007, on top of an average increase of 49 percent during 2006.
"Europe has seen strong increases, and rates in the Middle East and Asia have also risen. As these two particular markets have yet to reach full maturity, we expect to see the trends continue over the foreseeable future," according to a prepared statement from Margaret Bowler, HRG UK director of global hotel relations. "Indeed, as economic investment in each local economy increases, we may even see a significant increase in the pace of growth."
The rise in global hotel rates generally surpassed rate increases in key U.S. cities, noted HRG. Average rates for the first half of 2007 were up 4 percent in New York and 8 percent in Houston. In Europe, London rates increased by 5 percent, Stockholm rates increased by 10 percent, Berlin rates were up 17 percent and rates in Barcelona grew by 18 percent, according to the report.
"Overall the results show the health of the hotel sector continues to be strong, and once again underline the increasing need for companies to push hard to negotiate the best possible rates," according to Bowler.
Another noteworthy development, according to HRG, was a 28 percent denied bookings rate in the first six months of the year. The primary causes were clients either not negotiating corporate rates for particular locations or not including last room availability clauses in their contracts--or because hotels either did not honor negotiated rates or did not load them into global distribution systems, according to HRG. The report suggested that in cities where demand is particularly strong, some hotels favor higher-revenue business and therefore do not deliver negotiated client rates.
Another reason for denied bookings--or higher rates for corporations--was that many corporate travelers continued to book at the last minute, according to HRG. In the first six months, nearly 10 percent of bookings were made on the day of arrival, up one percent from 2006, according to HRG. Another 28.8 percent of bookings were made between four and seven days before arrival.
According to HRG, the only region not to show a "significant increase" in average room rates was Africa. However, a report from Smith Travel Research and The Bench showed that first-half 2007 ADRs across the Middle East and Africa increased 13.6 percent compared with the first six months of 2006. STR and The Bench also said occupancy rates rose 13 percent in Northern Africa.
The STR/Bench report also detailed ADR growth of 12.5 percent in Europe, 13 percent in Asia-Pacific (including 30.3 percent in Southeast, Central and South Asia), 17.6 percent in Central America and 23.8 percent in South America.
Tom Barrett, global strategic sourcing director for American Standard, said his company has been watching the trend of rising hotel rates. "We find it particularly troublesome in some of our markets where we've tried to deal with what I consider the 'bracket creep' of where things are going in pricing," he said. "Hotel pricing seems to be continuing to respond to increasing demand around the world and some of these markets are exceptionally high. We continue to negotiate as best we can with our hotel program and recommend people use our global hotel program in order to mitigate those cost increases."
Rapidly rising hotel rates can help promote policy and program initiatives around the world, Barrett said, which can help to keep negotiated rate increases near the lower end of industry forecasts. American Standard, for example, currently is piloting an online booking tool in offices outside North America.
"If you were to look at our average hotel pricing, the average industry forecast in 2007 was an increase of 5 to 10 percent, where we saw a 5 percent increase," Barrett explained. "Our blended hotel average across the world was 7 percent as opposed to the forecast of 7 to 9 [percent]."
High occupancies have also challenged American Standard travelers, Barrett continued, noting that corporate travelers sometimes are forced to book hotels outside city centers. In addition, the company has seen ancillary costs rise at hotels.