Corporate negotiated hotel rates for 2012 came in higher and
at times with stricter terms and fewer amenities than 2011 rates. Though such
results widely were expected around the industry, a few markets proved even
more challenging than many buyers anticipated.
With all but a small portion of negotiations complete,
consultants and hoteliers are reporting rate increases largely in the low- to
mid-single-digit range, as predicted late last year in several forecasts. Those
with smaller volumes and/or poor policy compliance had a particularly difficult
time.
"It was a challenging year," Carlson Wagonlit
Travel project manager Sherie Hermann said. "Hotels came into this in the
driver's seat, with high expectations of increasing rates. If a client had
leverage in spend, they were willing to negotiate, but it was difficult getting
hotels to negotiate where it was clear clients weren't able to drive that
market share."
Advito's 2012 industry forecast, updated last month, showed
U.S. hotel rates on average increased 5 percent to 6 percent, in line with what
Hyatt Hotels Corp., Starwood Hotels & Resorts Worldwide and Marriott
International reported during their most recent quarterly earnings calls. Hurt
by economic uncertainty, Europe experienced average rate increases between 2
percent to 3 percent, said Advito vice president Bob Brindley. Some markets,
including London during this summer's Olympics, were exceptions and had higher
increases.
Meanwhile, South America—particularly Brazil—proved to be
much more challenging than expected as average rates soared. "We
originally were looking at Brazil to come in with 4 percent to 6 percent
increases," Brindley said. "It really came in closer to 16 percent to
20 percent, with São Paulo at about 25 percent."
Rates with last-room availability particularly were hard to
come by in São Paulo. Chile, Venezuela and Argentina also had significant
increases in rates, said CWT's Hermann. Corporate demand has been strong in Latin
America. In January, it was the only region to see a year-over-year increase in
bookings through global distribution systems, according to Pegasus Solutions.
Negotiated rates in the Asia/Pacific region also increased a
bit more than expected, generally in the 8 percent to 10 percent range,
according to Advito's forecast. Rate growth was high in Singapore, Australia
and Hong Kong, but more moderate than expected in India, thanks to increased
supply.
Hermann said more buyers this year were willing to switch away
from incumbent hotels when negotiations were too difficult. Hotels, however,
were not as eager as in recent years to welcome new clients.
"If someone asked for a bid where there wasn't a
relationship, in most cases they responded, but in some they came back with a
rate that was artificially inflated," Brindley said. "They just weren't
looking for additional partners, which obviously is quite different from a
couple of years ago."
To that same point, high volumes were not necessarily a
guarantee this year for the best rates, particularly now that hotels wield more
sophisticated yield-management capabilities, according to American Express
Business Travel consulting director Marwan Batrouni.
"Suppliers were evaluating each account this year, and
very high production by specific clients did not mean the least amount of rate
increase," Batrouni said. "Some clients with lower production were
more successful in terms of decreasing rate, as the hotels were looking at
overall revenue."
Many hoteliers in initial negotiating rounds were excluding
amenities from negotiated rates, Batrouni said, but ultimately there weren't
many changes. Several buyers, however, for this year elected to drop free
breakfast as an included amenity.
"Those clients had a good understanding" of their
travelers, Batrouni said.
Hermann said she also saw several buyers negotiate out
resort fees. Hotels in such largely leisure destinations as Puerto Rico, for
example, often tack on those fees to cover laundry and other services that
transient business travelers often don't use; some buyers succeeded in
eliminating them to counteract rate increases, she said.
Many hotels this year held a harder line on terms and
conditions. A few key global brands increased minimum room-night thresholds,
and many hotels also were not willing to grant buyers a 6 p.m. cancellation
policy, Hermann said. Additionally, several hotels that previously had agreed
to two-year rates decided not to honor them this year, she added.
Consultants said buyers this year would have to manage
compliance better than ever, as the current outlook indicates negotiations for
next year's rates could be similarly challenging. Corporate demand on a global
basis is forecast to be steady, and hotels are building few properties outside
of developing markets.
"This will be a very key year, because suppliers are
more likely to track and monitor overall production and hold clients to their
commitments," Batrouni said. "Suppliers are looking for clear
commitments and indications for their clients that their properties will be
used."