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Study: Business Travel and Its Costs Are on the Rise

Forecasts from a New York University professor predict record increases in both room rates and hotel real estate.

The corporate travel industry is struggling with some of the challenges as enterprise IT. Travelers have access to free tools like Kayak, Expedia, and Priceline to book their own accommodations for work-related travel, and this practice is changing the way hotels do business.

Similar to “Shadow IT,” employees are taking advantage of technology for more control over their work and life. Case in point: A study from the Global Business Travel Association (GBTA) found that 42 percent of employees who book their own travel aren’t required to share an itinerary with their company. And when they’re booking those itineraries, many employees are turning to third-party tools instead of corporate booking systems.

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Image source: Skift

As TRIPBAM CEO Steve Reynolds told Skift, “A hotel general manager is thinking, ‘if I could fill every room at my hotel for whatever price, why would I sell it any lower?’ Even if you get a great [corporate rate], it may not be available when you need it and want to book it.”

Because of these trends, 2016 could be an expensive year for business travelers.

Bjorn Hanson, a professor at the New York University Preston Robert Tisch Center for Hospitality and Tourism, projects that hotel rates for business travelers will increase by as much as 7.5 percent next year, marking the biggest jump since 1987 or 2006, depending on the final result.

Movin’ On Up

Of course, rates are soaring along with demand. A forecast from PwC predicts that hotels will reach a 65.7 percent occupancy rate this year (the highest rate since 1981).

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Image source: PwC

Hanson estimates that 2015 will be a record year for capital expenditures, as well. Many improvements target the $1.25 trillion business-travel market.

U.S. hotel capital expenditures are expected to rise about 7 percent, to a record $6.4 billion, in 2015. This year marks the fifth straight increase in hotel capital expenditures, which are believed to have surged 137 percent since 2010 and will go toward amenities such as internet bandwidth; flat-screen TVs; walk-in showers; and upgrades to the food, beverage, and lobby areas.

The Future of Business Travel

Will higher costs slow down business travelers? Unlikely, according to GBTA. Its annual forecast expects steady growth over the next five years, particularly in Asia. According to a news release on the report, “China business travel will increase by 61 percent over the next 5 years, from $261 billion in 2014 to $420 billion in 2019. That increase is greater than the increases in business-travel growth in the next eight largest countries combined, including the U.S., Germany, India, U.K., Indonesia, France, Turkey, and Japan.”

As technology makes remote work easier, travel could be the glue that keeps companies together.

(Anders Jildén/StockSnap)

Morgan Little

By Morgan Little

Morgan Little is a contributor to Associations Now. MORE

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