Hogg, PKF Offer Global Hotel Advice

<B> Hogg, PKF Offer Global Hotel Advice</B>

By Amon Cohen

BTI UK Hogg Robinson is urging its clients to renegotiate their Asian hotel deals continuously as the Far East economic crisis intensifies.

At the same time, though, Hogg also is advising its clients to hold off on binding deals for 1999 in Russia, where rates remain the world's highest despite the country's recent problems. Hogg believes that Russian rates--like those in other European price hot spots such as London--will start to ease off next year.

The advice comes from BTI head of hotel consulting Carolyn Moore following the publication of BTI UK's 1998 Interim Hotel Survey. Instead of recording rack or other fixed rates, the survey uses data based on the average price actually paid by 6,000 corporate clients in 115 cities worldwide. Moscow topped the list with an average rate of $254; at the bottom is Epinal, France, at $72.

"Right now, we are seeing a stabilization in rates worldwide and a decline in certain areas. Asia will see further decline and we are advising clients that this is a good time to negotiate there. They should keep doing it--it is almost a case of going back to the suppliers month by month," Moore said.

"The Russian crisis has had no effect yet on rates, partly because most of them quote in dollars. However, we think they will come down eventually," she added.

The London market, which has seen phenomenal rate growth for the last four years, is still not quite ready to soften, though it appears to have reached its peak. Occupancy at hotels in the United Kingdom capital rose yet again in 1997, up to 84.7 percent from 82.9 percent the year before, according to Pannell Kerr Forster.

Melvin Gold, PKF's director of hotel, leisure and tourist services, said the first half of 1998 was equally strong, with occupancy in June slightly ahead of the same month last year. He predicts a decline, but only a small one, in the second half of 1998. But unless Russia or the Far East causes global economic meltdown, there will be little softening in the market.

"The market is still at a very high level. I don't see more than a slight downturn at the moment," Gold said.

Agreed Moore, "One or two London hotels are coming back to say they can do better rates, but we are not getting much out of them at the moment. Next year, however, a substantial number of new builds plus the slowdown should put corporates in a better position."

Even then, do not expect London hotels to let corporate clients name their price. "Millennium celebrations will keep prices artifically buoyant for most of next year," Moore said. As home to Greenwich Mean Time, London will be more influenced by this phenomenon than most, and the high value of sterling is showing no signs of slipping either.

Worldwide, the predicted economic slowdown will mean more work for travel managers, who are likely to start negotiating more with individual properties rather than hatching chain-wide deals.

Said Moore: "Chain-wide deals in a buoyant market make good sense because there is little room to maneuver, so it saves time to go through one source. In a slacker market, you always will get a better deal if you go direct, although that is not always practical if you are a corporation that travels to a lot of cities. In such a case, it is best to keep on negotiating on a chain level, but go direct to the hotels where you have particularly high volumes."

As an interim study, the BTI UK survey shows figures for the first half of 1998 compared with the whole of 1997. On average, the price paid in the latter period was $144 per night, a rise of 5.79 percent over the former.

That increase is likely to be smaller when the whole of 1998 is compared with 1997 because most rate rises take place in the first half--though Moore said that while "rates settle down in the second half, the difference is not that marked."

What exerts more of an influence is the fact that these are actually paid, not published, rates. "The percentage growth between 1997 and 1998 is smaller in our survey than the growth in rack rates," said Moore. "When corporates renegotiate, they tend to secure lower increases."

That holds particularly true for overseas cities where BTI UK clients do large volumes of business--especially in the United Kingdom itself, and particularly in London. In the 1998 Corporate Travel Index (<I>BTN,</I> Feb. 9), London ranked the world's second most expensive city for hotel accommodations, with a daily rate of $399. On BTI UK's list, the English capital ranks only 21st, with a rate of $193.

"Both we and our clients have very strong buying power in London in spite of the seller's market," Moore said. "In addition, there is a greater mixture of accommodation types because this is a domestic market for us. If people are traveling abroad, they want to be certain of what they are going to get, so they are prepared to pay more."

This principle also explains why, as in the BTN index, cities in developing nations figure so high up the list. Cities like New Delhi and Sao Paolo, for example, have a relatively small number of business-standard hotels, and travelers are prepared to pay a premium to stay in a branded property whose values they understand.