Business travel will be more pricey next year
Each fall, U.S. companies and hotels agree to corporate rates and amenities for the following year, and this year, Bjorn Hanson, divisional dean of the Tisch Center for Hospitality at NYU, says the two sides are further apart than normal as negotiations get underway.
Business travelers are a lucrative market for hotels: Almost 20% of occupied U.S. room nights and almost 30% of U.S. lodging industry revenue come from corporate and contract rates, Hanson says.
Occupancy levels and average daily rates are up at hotels across the country. Now that the economy has improved and people are once again traveling, hotels aren’t as willing to drop corporate rates or throw in perks such as free Wi-Fi and breakfast.
This year, the average negotiated corporate rate increased by about 5%. The average daily rate for U.S. hotels overall went up about 4.5%. Hanson based his study on interviews with industry executives and financial data.
According to STR, a Nashville-based firm that tracks hotel rates, the average daily rate for U.S. hotels through July is $109.95.
Graeme Gibson, a corporate travel manager at Dental Departures in Seattle, a network of dentists, says he is finding it much more difficult to negotiate with hotels this year.
When he started booking for Dental Departures in 2010, hotels’ corporate sales managers were much more willing to negotiate down the price, he says. “While this was not during the absolute panic of 2008, it seemed that people were much more eager to have our business at a more reasonable cost,” he says.
David Townshend, senior vice president of global sales at Marriott International, says, “Our hotels are extending fewer deals to fewer accounts.”
“Corporate travel managers want to do everything they can to keep pricing as flat as possible,” he says. “On the supply side, we’re looking for ways to drive increases wherever possible. It’s critical the industry be profitable so we can continue to invest in it.”
As a result of the tighter market, Hanson says that corporations will probably start sending employees to more select-service and limited-service hotels rather than luxury properties. Think Holiday Inn Express over Le Meridien.
“Some companies are trading down,” Hanson says. “It may be that the guestrooms in many select-service hotels are just as nice and in some cases ? nicer than traditional, full-service hotels. The rooms may be larger, the decoration more appealing to younger travelers and the informality may appeal.”
To some business travelers, limited-service hotels are not a bad option because they often offer free Wi-Fi and breakfast.
“In fact, I have noticed that certain brands of select-service hotels ? often deliver superior services for the business traveler over so-called luxury brands,” says Roger Phelps, a promotional communications manager in Norfolk, Va.
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