Corporate travel managers sending out 2006 hotel requests for proposals and negotiating rates have accepted that prices in general will go up, and those with a great deal of business in New York City, where increases will be perhaps most pronounced, are eager to offset the higher costs any way they can, but most potential cost-saving options are unpalatable to many buyers.
Perhaps the most obvious solution to avoiding Manhattan hotel rates is to book rooms outside of Manhattan. Queens, Brooklyn, the Bronx, and even eastern New Jersey all are close and easily accessible by public transportation. The rates in hotels there are, on average, notably lower.
Unfortunately, few companies are willing to hold conferences or events in an outer borough, which means housing attendees there may not save enough money to justify the time and hassle it takes to commute.
"A lot of our business takes place in Midtown and there are cheaper hotels out by the airport," said Margie Grant, purchasing manager for hotel services for New York-based Verizon Communications Inc. "However, when you add up the amount of money you spend going back and forth, it's about the same."
For companies that are fortunate enough to have large offices of their own in New York City, keeping meetings and events in-house can do wonders for the travel budget.
"Our motto is, if it fits in the building, it stays in the building," says Donna Healy, vice president and deputy head of corporate events for the Americas for New York-based Credit Suisse First Boston.
"It really does save a tremendous amount of money," she continued. "It costs us triple the amount to do it in a hotel, but we only have so much space, so sometimes we have to go out of house."
Moving events or conferences into one's own meeting facilities isn't always the most popular move with employees, either.
"We have been bringing in the business since 2001, and believe me, many of our analysts were against it," said Healy, "but everyone got used to it."
Perhaps surprisingly, few companies are willing to move events to a cheaper hotel. Despite the prices, most U.S. companies still put too high a premium on the glitz and glamour of a first-class event to do that, at least for now.
"If we do go out of house, we'll try to find a quality hotel and see if they'll work with us or negotiate down," said Healy, "but we won't go to that lower tier at this point."
Indeed, negotiating seems to be the name of the game, since there are only so many options available to corporate travel managers in regards to New York City, as evidenced by responses when they're asked about considering other cities. Most scoffed, saying it simply wasn't an option, especially when one's corporate headquarters are here, or when executives are accustomed to traveling to the Big Apple.
It's well known that the price of a room in New York plummeted following the terrorist attacks of Sept. 11, 2001, but has recovered in recent years as tourism has come flooding back to the city. For some travel executives, that's explanation enough for higher prices, and they see no manipulation in the market. Others aren't so sure.
"Every year they try to force our hands," said Phil Dunphy, manager of corporate travel at New York-based Pfizer Inc. "All the hype is generated so they can push the increases through, but it's our job to make sure whatever we negotiate is fair and equitable for all involved."
"There's no doubt that occupancy is up" in New York, he said, "so they can charge higher rates. Everyone just needs to remember the corporate partners that were there for them when 9/11 did hit."
Even those who don't share Dunphy's feelings are displeased with the increases they are being asked to pay.
"The city where we have seen the highest rate increases are New York City, and that's because there is a demand here," Verizon's Grant said, "but between the special events and the tourists and every business here crying for rooms—and there aren't that many new rooms coming on the market—I don't think there's that much hype, I just think that all these things are coming together at the same time."
Smith Travel Research reported that hotel occupancy in New York averaged 82.2 percent for the first seven months of 2005, a 3.9 percent increase from the same period in 2004. Average daily room rates during that period rose to $191, an 11.7 percent increase over the first seven months of 2004.
Even in July, hardly one of New York's most popular tourist months, hotel occupancy rose to 85.1 percent and average room rates hit $187.38, up 13.5 percent over rates from the same month last year.
Analysts predict occupancy rates will continue to rise well into 2009. And the crowded conditions can be blamed on more than just eager tourists and business travelers. Condominium conversions are estimated to have taken more than 3,579 hotel rooms off the market since 1999
(BTN, March 21). Even the storied Plaza Hotel found itself at the center of a whirlwind of controversy earlier this year over a plan to transform a significant portion of its rooms into condos
(BTNonline, April 15).Also, with the sky-high cost of real estate in Manhattan these days, many developers are finding residential properties a more lucrative choice to build than hotels.