Study: Hotel Costs to Rise for Business Travelers in 2014
Room rates could go up between 5 and 6 percent next year as the economy continues to improve, according to a new study.
Association budgets may not be as tight as they were a few years ago, but that doesn’t make the recent findings of a New York University study any easier to swallow.
The annual negotiations between U.S. companies and hotels to set corporate rates and amenities are underway, and the two sides are further apart than usual, according to Bjorn Hanson, divisional dean of NYU’s Tisch Center for Hospitality.
“The emerging seller outlook for 2014 is for corporate contract rates to increase by a national average of 6.5 to 7.5 percent or more, but many corporate travel managers are planning for increases of 4 to 5 percent,” Hanson said in a statement announcing the study. “A preliminary estimate for the result of negotiations is for an average increase for corporate and contract rates of 5 to 6 percent, depending on location and the number of room nights for a specific buyer.”
In comparison, for 2013 the average negotiated rate increased about 5 percent. Hanson credits the improving economy for the bump in room rates.
The study also found that hotel executives are increasingly negotiating to charge separately for some services and amenities instead of including the charges in the negotiated room rates.
“In 2010 and 2011, there was a trend for corporate and contract rates to include services and amenities including internet access, fax charges, use of fitness centers, and breakfasts,” Hanson said. People are once again willing to travel, which means hotels don’t need to throw in extra perks.
As a result of rising costs, groups have been sending employees to more limited-service hotels rather than luxury properties, Hanson said.
“Some companies are trading down,” Hanson recently told USA Today. “It may be that the guest rooms in many select-service hotels are just as nice and in some cases … nicer than traditional, full-service hotels.”
What does this mean for meeting planners?
“Since most conventions and meetings are held in the larger, luxury, and upscale properties, this will present a challenge for planners,” R. Mark Woodworth, president of PKF Hospitality Research, told the Professional Convention Management Association. “Events will have to be booked further in advance, and planners are starting to concede the need to pay higher room rates.”
How would increasing room rates affect your association, and how might you adjust? Share your thoughts in the comments.