BTN Europe presents an overview of business travel and MICE predictions for this year
Virtual Event - 25-26 May 2021
Virtual Event - 9 June 2021
ExCeL London - 30 Sep - 01 Oct 2021
As corporates and their agents begin the annual round of negotiations with hotels to fix rates and volume for 2008, what can they expect?
The brief answer would seem to be: not much.
The hotel business is on a roll. 2007 has seen an endless stream of figures recording substantial rises in room rates. HRG's 2006 Hotel Survey found that of all the cities surveyed, only one had had a drop in its average room rate. (This was Rome where there were unusual local circumstances).
The scale of some of the increases were astonishing. Moscow was up 25%, New York up 15%, Hong Kong 20%, Singapore 24% and Mumbai an unbelievable 49%.
In Europe TRI Hospitality said that in June, the revenue per available room (revPAR) rose by 35.1% in Paris and 12.3% in London.
Markets like Los Angeles, Chicago, San Francisco, London and New York are extremely tight. Some hoteliers in New York will currently only accept a booking for two nights' minimum.
The small crumb of comfort is that BCD Travel in its annual clients' survey last month predicted that room rates would rise by an average 4.5% in 2008, compared with 7-9% rises in 2007.
Priscilla Campbell, American Express Business Travel practice leader hotel advisory services, endorses the view that rates are going to rise this year. "It is definitely a seller's market. It is going to be a difficult negotiating climate," she told BTE.
Hotels she said would be looking for volume and commitment and she said she could not stress enough the need for corporates to deliver.
"Hotels have become very keen on ensuring that not only do they get volume but also a commitment on room nights. Corporates which have a policy on hotel compliance - these are the ones that will fare better because the hotels will know that they have the strength to support their property.
"It is absolutely important that corporates deliver room nights and volume."
Ms Campbell said corporates should be getting their RFPs in by early September so that the deals are tied up by December ready for 2008.
But she warned that some hotels might decline to respond to an RFP or not offer a good rate if a company had a poor record on compliance and delivery.
"They are really looking to clients to deliver. I can't stress that enough. If a client has strong compliance, the hotel will want to see that too.
"They will want to see the client's policy and see if he is serious and what is the likelihood that he will deliver the volume."
This is not particularly encouraging news as the BCD survey found that hotel policy compliance was a "major challenge" to companies. Average hotel compliance, BCD found, was 61-70%, compared with 71-80% for air travel and 91-90% for car rental.
47% of corporates told BCD that they encouraged rather than mandated hotel policy and only 46% said they required hotels to be booked through the preferred channels. However there had been a small rise of 3% in companies mandating hotel policy, from 9% in 2006 to 12% in 2007.
But the hands of corporates are not completely tied in their negotiations with bullish hotels. Ms Campbell said that hotels were still being "pushed back" by travel managers in their drive for dynamic pricing.
"It is still difficult to quantify the value of dynamic pricing control," she said. "Hotels have not been able to produce reporting to substantiate the value of dynamic pricing so travel manager have been able to push them back in favour of fixed negotiated rates.
"We did have some clients who took dynamic pricing for a test drive but there were mixed results. It needs more research and it is incumbent on hotels to demonstrate its value."
There are also two other cards the corporates can play. They can negotiate on what amenities a hotel is prepared to provide along with the rates and they can ask what "green" initiatives it has taken.
But these were of limited value. It was the corporates, Ms Campbell said, which could deliver and, equally important, could show they could deliver which stood to win the best rates.