Hotel market proving resilient, says influential survey

25th Jul 2008

The international hotel market is proving resilient amid tough economic conditions although travellers are choosing “smarter”, according to Hogg Robinson’s latest six-month hotel survey.

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:

* 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.

* 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.

* 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.


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

* 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, said, “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.”

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.

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.

Top 10 Most Expensive Cities Worldwide: 2007 v 2008
Key European cities have continued to show consistent growth over the last six months. Once again Moscow has witnessed the highest average room rate achieving 25% growth, compared to 11% in 2007. This can largely be attributed to the dominance of five star hotels in the city and a lack of new hotels due to sustained high real estate values and restricted land availability.

The Gulf has similarly seen significant increases with Abu Dhabi entering the top 10 most expensive cities for the first time at eighth place. The limited supply of hotels, primarily dominating the top end of the market, combined with high demand and upgrades of existing hotels in the region, has forced prices upwards. This is further assisted by the historic perception of lower rates than its neighbour Dubai which, as a result of the overflow of demand, has moved from fourth to seventh place.

As the financial hub of India, Mumbai has benefited from sustained interest from the banking and financial sectors with hotel rates continuing to rise by a staggering 37%. Bangalore, however, experienced a softer increase of 3%. This was as a result of an oversupply of hotels and a move from companies to other cities within India offering a similarly experienced workforce and lower operating costs, pushing the city out of the top 10 to 14th position.

London has moved out of the top 10 to 16th position due to the buoyancy of both the European and Asia Pacific markets. A solid supply of stock and steady demand has resulted in a more conservative average rate increase of 2%.



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