Survey: Weaker U.S. Hotel Demand, Travel Budget Increases & Airbnb Slowdown Expected by Corporates in 2019

In its annual AlphaWise Global Hotel Corporate Travel Survey, Morgan Stanley Research found that overall hotel demand for corporates is expected to increase year over year in 2019 but that growth in Europe will eclipse that of the U.S. This comes as a greater number of respondents in this year's survey expect their 2019 travel budgets for both hotel and air to increase.

Corporate Hotel Demand Mixed

Across the global regions, respondents expected their room volume at hotels to increase 1.6 percent in 2019 and room rates to rise 1.9 percent. Broken down by region, however, expectations become more nuanced

In the U.S., corporates expect their room volume to grow 2.8 percent, down from 3.3 percent growth in 2018. They expect room rates to rise 2.2 percent over 2019, but that, too, is slightly lower than 2018's expectation of 2.3 percent.

In the most recent round of hotel earnings calls, analysts asked hotel execs whether there's any indication of a slowdown in U.S. corporate demand based on the 2019 rate negotiations underway. Both Marriott and Hilton said demand appeared steady, with little to point to a softening of the market in 2019.

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In European markets, growth appears stronger. In France, 2019 volume and rate growth expectations improved up 1 percent and 1.4 percent, respectively, from 2018 expectations. In Germany, room volume is expected to grow 1.7 percent, higher than 2018's 1.5 percent, while rate is expected to grow 1.4 percent in 2019, a dip from 2018's 1.5 percent growth. In the U.K., room volume is expected to grow 1.6 percent, less than the prior year, and room rate is expected to increase 2 percent, greater than the prior year.

In Asia, room volume is expected to increase 1.6 percent and room rates 1.9 percent, both improvements on 2018 levels. In Latin America, volume is projected to rise 1.7 percent and room rates 1.1 percent. In Africa, volume is expected to grow 1.2 percent and room rates 1.5 percent. And in the Middle East, room volume is projected to grow 1 percent and room rates 0.5 percent.

Travel Budgets on the Rise

Sixty-seven percent of survey respondents expect their overall travel budgets, for both hotel and airline spend, to increase in 2019; that's versus 63 percent in last year's survey, and it's the highest proportion of respondents expecting an increase in the past eight years.

Fifty-five percent of respondents expect room rates to increase, and 56 percent expect their room volumes to increase. Despite expected rate increases, fewer companies are looking to trade down hotels—34 percent said they would, versus 37 percent last year.

The survey also questioned travel managers about the use of hotel reshopping services, such as Tripbam and Yapta, as they can knock hotels' pricing power, Morgan Stanley Research noted. Twenty-seven percent of respondents used a reshopping service, up from 17 percent a year ago.

Airbnb Slowdown

Despite the reported growth and new initiatives underway at Airbnb for Work, the survey noted that adoption of the platform has slowed. This year, 31 percent of respondents used alternative accommodations like Airbnb in the previous 12 months, versus 35 percent in the 2017 survey. Some 8 percent of non-users expect to use Airbnb in the next 12 months, versus 13 percent who said so a year ago.

In a separate annual Morgan Stanley Research survey of more than 4,000 consumers, titled Why Is Airbnb Slowing and What Does It Mean for Hotels and OTAs?, the firm found that privacy, safety and legal issues, as well as competition from online travel agencies and plateauing awareness among consumers all are hindering Airbnb's growth. The results fall in line with last year's survey, despite initiatives Airbnb introduced during the past year.

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