The negotiating season for 2016 corporate hotel rates proved
to be even more challenging than in previous years, but efforts paid off, as rate
increases came in softer than forecast in most global regions, according to analysts
at mega travel management companies' consultancy groups.
"We did run into situations where we really had to do
multiple rounds of negotiations, similar to last year," said Marwan
Batrouni, senior director and global hotel practice area leader at BCD's Advito
consultancy, "but it felt like it was a little bit more demanding than
last year, especially in primary markets."
Eric Jongeling, director of hotel solutions in the Americas
for Carlson Wagonlit Travel, said many clients had a hard time getting hotels
to even respond to requests for proposals, as the suppliers expected larger
room night or spend commitments. That back-and-forth of trying to get hotels to
bid added time to the negotiation season, Jongeling said.
In North America, hotel rate increases averaged 2.7 percent
year over year, according to Batrouni. "Not too bad," he said, "given
that we were forecasting a little over 5 percent increase for the entire
year." Not surprisingly, San Francisco proved the anomaly, as rates
increased more than 10 percent year over year. In New York City, negotiated rates
increased an average of 1.5 percent, while in Houston, rates dropped 0.2
percent. Chicago's average increase of 2.8 percent was on par with the region.
Europe saw a 0.8 percent increase in rates. That average,
the result of large increases in some markets and significant decreases in
others, is less than the 3 percent originally forecast by Advito. Rates
decreased in all other regions, 3 percent in Latin America, 2.4 percent in the
Middle East, 1.2 percent in Asia and 0.2 percent in Africa.
"Every region has a slightly different dynamic in terms
of supply and demand, so that definitely plays a part in what we are seeing
here," Batrouni said of the softer results, "but we feel that
negotiations are also playing a fairly big role. We compare the initial bids
that come in, which would be indicative of how suppliers feel about the
situation in their specific markets, with where we end up at the end of the RFP
season. In all cases, the initial offer is higher than where we actually end
up."
According to Jongeling, CWT clients saw North American rates
increase by a little over 4 percent, the bulk of that coming from U.S. markets,
up 4.2 percent. In Europe, rates grew about 1.5 percent. Asia/Pacific saw a 2
percent increases, and Latin America saw a decline of 0.5 percent.
Chicago-based Exp corporate services and travel manager
Christel Peterson, who negotiates with about 25 regular hotels, said her program
fared better than expected. "I was surprised at some properties that
didn't put in too much of an increase." Others though, tried to increase
rates by as much as 20 percent on their initial offer, finally lowering their
figure after some back-and-forth.
Dynamic pricing factored into discussions once more for
2016, but Batrouni said hoteliers' push for it was weaker than he anticipated,
indicating "there's still that appetite by suppliers and corporate buyers
to continue on with static rates." Chainwide agreements were more top of
mind this year than in previous years, he said. Some clients accepted that dynamic
rates may be a better option for supplementing their programs in secondary and
tertiary markets, something he expects will continue.
Jongeling said clients have chosen to accept dynamic rates
in certain instances, "but a lot of them are still not completely comfortable
with the dynamic approach. They don't feel like they have enough visibility
into what they're actually receiving through that negotiation."
Hotel amenities, such as breakfast and free Wi-Fi, have
played an important role in negotiations in recent years, as hoteliers leverage
them to push rates. For 2016, however, those amenities carried less value as
they became increasingly standard, according to American Express Global Business Travel hotel practice line
manager Cindy Armitage. Jongeling,
too, saw "flat, if not better amenities inclusion than in previous
years."
Batrouni suggested hoteliers have instead set
their sites on cancellation terms, withholding same-day-cancellation agreements
where they might have once withheld free Internet. "There was a lot of
negotiation and back-and-forth to make sure that we have same-day cancellation
for our clients," Batrouni said, adding that he expects cancellation terms
will be a bigger issue in upcoming RFP seasons as hoteliers experiment with stricter
policies.