|Corporate hotel rate negotiations for 2014 – Preliminary outlook.|
Wednesday, 25th September 2013
Source : Bjorn Hanson, Ph.D.
Most corporate and contract rate negotiations for 2014 will begin during September and continue into December.
Corporate and contract rates represent almost 20 percent of occupied U.S. room nights and almost 30 percent of U.S. lodging industry revenue.
Again this year it appears the difference between buyer and seller expectations for corporate and contract rates for 2014 is large.
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 4.0 to 5.0 percent.
A preliminary estimate for the result of negotiations is for an average increase for corporate and contract rates of 5.0 to 6.0 percent, depending on location and the number of room nights for a specific buyer.
For 2013, the average negotiated rate (ADR) increased approximately 5.0 percent, compared with the overall ADR increase for U.S. hotels of about 4.5 percent.
A trend that accelerated in 2012 and 2013 of hotel executives negotiating to charge separately for some services and amenities instead of including these charges in negotiated room rates will continue. 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.
A trend that is continuing is for buyers to reallocate the portfolio of contract rate hotels to include more upscale, select service, and limited service hotels in place of luxury and upper upscale hotels.
Another emerging trend is for corporate travel managers, some of whom are finding that negotiated rates are not especially sensitive to changes in the number of occupied rooms committed, is to allow corporate travelers to select hotels that are not included in the portfolio of hotels with negotiated rates. This can be especially popular among younger travelers and can have the effect of lowering the overall average rate paid by the corporation.
These estimates are based on selected interviews with industry executives and corporate travel executives, analysis of industry financial data, press releases, and information available on hotel and brand websites.
About the Author
Bjorn Hanson, Ph.D., is divisional dean of the NYU-SCPS Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management. He is a hospitality and travel researcher, widely respected for his industry forecasts and for having created econometric models that transformed business analysis in the field. Prior to joining NYU-SCPS, he held the position of global industry leader, hospitality and leisure, at PricewaterhouseCoopers LLP.
About the NYU School of Continuing and Professional Studies Established in 1934, NYU-SCPS is one of NYU’s several degree-granting schools and colleges, each with a unique academic profile. The reputation of NYU-SCPS arises from its place as the NYU home for study and applied research related to key knowledge-based industries where the New York region leads globally. This is manifest in the School’s diverse graduate, undergraduate, and continuing education programs in fields such as Real Estate and Construction Management; Hospitality, Tourism, and Sports Management; Global Affairs; Philanthropy and Fundraising; Graphic Communications Media, Publishing, and Digital Arts; Human Capital Management, Marketing, and Public Relations; with complementary strengths in the Liberal and Allied Arts; Translation and Interpreting; Management and Information Technology; and Finance and Taxation.