Hotel Executives See "Reasonable" Rate Hikes Ahead

While all indicators point toward further rate hikes ahead for the 2007 corporate negotiating season, industry executives today said they wouldn't leverage their strong position to bleed travel buyers—too much.

"Rate increases will be reasonable," said Matt Hart, president and COO of Hilton Hotels Corp, today at the 28th annual New York University International Hospitality Industry Investment Conference. "We're not out to price-gouge." Loews president and COO Jack Adler said that the current cycle dictated rate increases, but stressed that both hoteliers and buyers expected the increases. "Buyers understand that rates have moved up," said Adler, "but we understand that its cyclical, and we have long-standing relationships with companies."

With average daily rates 6 percent higher than they were a year ago, according to Randy Smith, CEO of Smith Travel Research, hotel executives again find themselves in an enviable position to negotiate. Smith said that increases in monthly demand were directly responsible for driving rates up, further cushioning supplier positions.

Carlson Hotels Worldwide president of the Americas Yvonne La Penotiere said 2007 would be a tough season for negotiations, but rates, especially for its Radisson brand, would not be as aggressive as some of Carlson's competitors. "We've been trying to rebuild the Radisson brand over the past two to three years, and don't feel that the brand is yet in the position where we can drive rate real hard. We're still trying to get back some of the travelers that we alienated in the past."

La Penotiere added that many of Carlson's biggest clients consider rate their number-one priority, but beyond that, look to add value to their programs by negotiating for such added amenities and services as last room availability. "That's where we can add value. A nice balance between, 'Well, we need a little more rate, but we'll give you some value-added things to offset that.' "

Raymond Bickson, managing director and CEO of Taj Hotels Resorts & Palaces, said that one such amenity, high-speed Internet, was quickly evolving from an amenity to a room standard. "High-speed Internet is becoming the same as having a bed and a bathroom," he said.