HRG survey shows resilient hotel market

23rd Jul 2008

Hogg Robinson Group’s six month hotel survey has found that the international hotel market is proving resilient amid tough economic conditions with most regions experiencing growth.The emerging economies have maintained their previous strength with Moscow, at 25% growth, once again topping the chart as the most expensive destination for corporate travellers, and Mumbai booming with an average rate increase of 37%.

Other trends noted by the international corporate travel services company include:
á      All of the key European markets exhibited strong growth with Berlin achieving the highest rate rise of any city at 39% - rallied by an increase in demand in an under supplied market and assisted by an upsurge in exhibition and conference activity, particularly in the international film industry

á      Abu Dhabi has entered the top 10 for the first time and, with an average rate growth of 23%, its rates now rival those of Dubai, reflecting the burgeoning economy in the Gulf

á      Average rates in Eastern Europe and Asia Pacific grew by 22% and 20% respectively - demonstrating clear benefits from a continued focus on the luxury end of the market, combined with an ongoing shortage of supply as hotels struggle to keep pace with demand

á      London has maintained growth, although at 2% it is slower than previous periods surveyed, resulting in the city dropping out of the top 10 to 16th place


á      North America, where the dollar exchange rate has stayed relatively stable during the period, has stayed static with rates in New York remaining flat and marginal declines of 3% and 2% noted in Houston and San Francisco respectively.

Margaret Bowler, Director Global Hotel Relations at HRG, says: “The hotel industry has continued to show an increase in hotel rates, albeit at a slower rate than we saw for the same period in 2007. However, as the market softens we can expect to see more hotels adopting sensible pricing in order to maintain current occupancy levels.”

With sustained demand in certain cities, availability is an ongoing challenge. HRG’s data shows that 36% of denied bookings are either due to a lack of a negotiated rate, or hotels choosing to ‘close out’ agreed rates in favour of more lucrative options. This highlights the need for businesses to secure a comprehensive and effective Hotel Rate Programme and emphasises the ever more important role of HRG in successfully securing competitive rates on behalf of clients.

The results show that corporates appear to be travelling smarter as they look to control travel costs and maximise their return on expenditure. A slight decline recorded in the average length of stay highlights this point, as business travellers look to reduce accommodation costs or where possible find alternatives to travel: one day meetings, video conferencing or reducing the frequency of trips. HRG is able to advise clients on the best and most effective ways to cut costs, identifying alternative travel options to help manage and reduce corporate travel budgets.

This trend is further reflected by the growing number of companies travelling to emerging economies, as an increasing number of businesses transfer elements of their business to exploit lower operating overheads. These markets are expanding to meet demand. This is most evident in India, in particular the financial capital, Mumbai, where the banking, financial and IT sectors show no signs of slowing their operations; and cities such as Hyderabad are rapidly following suit. Demand in these cities continues to outstrip supply and the majority of investment at the top end of the market is supporting continued rate increases.

HRG’s interim survey is based on a combination of industry intelligence, actual room nights booked and rates paid by its UK clients during January to June 2008 compared to the same period in 2007.


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