HRG Study: Upper Scale Room Rates Rising Fastest

Higher-tier hotel rates worldwide have increased at a much faster rate than those in budget sectors, and major cities around the world continue to show double-digit growth in room rates, according to a hotel survey released today by HRG.

The survey, based on industry figures and booking and rate data mined from HRG U.K. clients during the first nine months of this year, showed that room rates increased proportionally to the star rating of the hotel. Five-star property rates were up 15.2 percent over 2005, compared with a 4.8 percent increase for budget properties.

"The budget sector has witnessed aggressive expansion with a resulting increase in rooms available and competitive pricing policies designed to maintain marketshare and secure new customers," Margaret Bowler, HRG U.K.'s general manager of hotel relations, said in the survey.

Regionally, Asia/Pacific showed the highest increase in room rates, up by almost 20 percent, because of rapid growth in India, Singapore, Hong Kong and Tokyo, according to the survey. Eastern Europe also showed a strong growth rate of 18 percent.

The survey noted the 10 most expensive cities as far as hotel rates. Moscow had the top position with an average rate of —219.19 per night, as business travel to the city is increasing while the city has a shortage of quality hotels for corporate travelers. New York City was second, with an average rate of —178.94 per night, followed by Paris, Milan, Hong Kong, London, Dubai, Stockholm, Geneva and Rome.

It was Mumbai, however, that showed the highest growth, a 46 percent increase in room rates, according to the survey. Moscow and Singapore followed with growth rates of 29 percent. Two U.S. cities were in the growth-rate top 10: New York at 17 percent and Houston at 15 percent.

HRG also noted the increased push from hoteliers for dynamic pricing, saying that demand-based pricing that can change on an hourly or daily basis is now largely the industry standard. Travel managers, however, remain reticent to accept such a model.

"It is likely that, over the next couple of years, some rate negotiations will center around an agreed discount off the floating rate," Bowler said. "In the U.K., we are already trialing this with some of our corporate clients, but ultimately the challenge for the industry lies in its ability to persuade clients that such a pricing model is in their best interests."