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
Thursday 9th September, JW Marriott Grosvenor House
At a conference in New York organised by the National Business Travel Association (NBTA) last month, there were two presentations on the state of the US hotel market. Both experts, Amanda Bryant, research analyst for Merrill Lynch, and Bobby Bowers, senior vp for Smith Travel Research, made, in passing, similar points.While occupancy was rising very slowly, was flat or even falling in various American cities, average room rates, in all these locations, were continuing to rise. Mr Bowers gave as some of his examples the occupancy and average daily rates (ADR) in cities across the US in the 12 months to February 2007 compared to the same period to 2006.In New York occupancy stayed the same in the two years at 82.9%; in Los Angeles it went up 0.5% and in San Francisco up by 1.5%. The ADR in New York, Los Angeles and San Francisco in that period went up, respectively, 12.6%, 9.3% and 9.9%.He remarked that the increase in revenue per available room (revPAR) was almost solely driven by the increase in room rates.Ms Bryant remarked: "Hotel companies are really pushing their rates aggressively. They are making up for lost time."She said with just three major players, Marriott, Starwood and Hilton dominant in the market and being "extremely aggressive on prices", it was harder for travel managers to negotiate deals.Both said there was no obvious end, although rates might not rise as much in 2007 as in 2006.Something similar is happening in the Eropean market, especially in the UK. Recent reports in Britian by two leading consultants, PKF and TRI Hospitality have found that ADRs are risng much faster than occupancy.PKF said that in January 2007, average room rates in London, which is enjoying an almost unprecedented boom, were up17.9% compared with January 2006 while occupancy was up just 4.3% to 71.6%.TRI Hospitality's HotStats survey found that in February London's daily rates rose by 11.3% while occupancy increased by 0.1%. Again room rate increase was almost the sole driver of the 11.3% rise in revPAR.But both consultants and hoteliers reject the contention that this is a case of hoteliers ratcheting up prices while the going is good.Andrew Ashmore, UK director of sales for Hyatt International, says there is an element of hoteliers "making hay while the sun shines" but the main reason, as far as his upper end of the market was concerned, was that demand and occupancy were "going through the roof."The group's Great Eastern Hotel in the City has had a "considerable rise in occupancy and demand is still strong so rates are going up."Hyatt's other London property, the Churchill off Oxford Street was partly closed for restoration so occupancy and rates had both risen.Jonathan Langston, managing director of TRI Hospitality, said that demand in London was "in excess of 80%" with hotels working at peak levels and "filling up six nights out of seven."He added: "This is down to simple supply and demand. Occupancy has reached a certain level and this gives hoteliers the opportunity to raise their prices."But Mr Langston said that full-service hotels were not at liberty to raise prices at will because "they are under sustained pressure from the budget sector which offers value and is highly acceptable to some corporates."It is not purely a sellers' market as there are these other factors which moderate prices."This may be small comfort for travel managers looking for a hotel room not just in London and New York but also in Zurich, Singapore, Hong Kong and Moscow where the same problem of demand and supply exists.This will continue until new hotels come onto the market. New York, to exacerbate its high price problems, actually suffered a fall in the number of hotel rooms last year and the hotel supply in America also slowed significantly from last August. It is not surprising to hear that some New York properties will now only rent rooms for two or more nights.London has not reached this situation yet as the number of hotel rooms in the capital is growing, although clearly not fast enough to meet current demands.The bad news is that this era of rising rates could go on for two to three years. If national economies continue to thrive, perhaps more.