Amex GBT Forecasts Hotel Rates Likely To Continue Upward Trajectory
According to new forecasts from American Express Global Business Travel (Amex GBT), hotel rates will likely continue to rise in most locations globally during 2024 despite an expected softening of leisure travel demand,
In fact, Amex GBT’s ‘The Hotel Monitor 2024’ finds that rates could rise by as much as 17.5% in some cities, where tight supply combined with local conditions push the average cost of a room upwards.
The Monitor forecasts hotel price trends in more than 80 major cities based on analysis of millions of hotel transactions and International Monetary Fund (IMF) economic data.
According to the report, Canada’s hotel industry achieved record-breaking average daily rate (ADR) and revenue per available room (RevPAR) levels in 2023. Vancouver saw the country’s highest occupancy, at 89%.
A raft of new hotel construction projects across Canada was announced this year which will increase supply, putting downward pressure on rates. But new rooms may not arrive in significant numbers until later in 2024.
Across the country, rates are expected to rise by about 7.8%.
Predictions for some other top business travel destinations include:
- Chicago – +12.6%
- Paris – +11.0%
- Berlin – +9.4%
- London – +9.1%
- Vancouver – +8.9%
- Shanghai – +8.4%
- Montreal – +8.3%
- Singapore – +7.5%
- New York – +6.8%
- Toronto – +6.7%
The Hotel Monitor 2024 reports that most cities should experience rate increases in line with local inflation, following the large price jumps in 2022 and 2023 fueled by a surge of so-called ‘revenge tourism.’ Softening leisure travel demand should be replaced by the continued uptick in business travel, and meetings and events.
The evolution of working culture towards more flexible, hybrid and remote models is having a direct impact on business travel patterns. An incremental lift in weekend corporate travel and a shift to fewer but longer business trips point to a growing trend of travellers combining business trips with leisure activities.
Global hotel chains are responding by expanding extended stay offerings. Vacation letting companies also report growing requests for high-speed WiFi and later departures to facilitate remote working, suggesting business travellers are increasingly looking beyond traditional hotel accommodation.
Even with global inflation beginning to slow, it continues to play an influential role in room rates as increased costs put pressure on hotel operating margins. Chief amongst these is staff costs, with hotel wages in North America reaching record levels in 2023.
This rising cost base is disrupting the traditional relationship between supply and demand within the hotel industry, and hotel operators are increasingly limiting inventory to respond to staffing shortages, reduce overheads and protect rates. In practice, this means traveling off peak may no longer deliver previously available levels of savings as the link between rates and occupancy weakens.
The anticipated changes in leisure travel open the door for corporates to negotiate better deals with hotel partners for 2024. Large increases absorbed during 2023 have put an impetus on travel buyers to manage costs, while rising pressure to meet sustainability commitments adds another dimension to program building.
New program priorities and changing travel patterns mean travel buyers should reassess existing arrangements and prioritize negotiating better rates in the most frequently visited hotels and cities. Concentrating spend on a smaller number of providers should help secure better rates, improved terms and other amenities, even for smaller businesses.
Simon Fishman, Vice President, Global Hotel, Amex GBT, observed that: “With the softening of leisure travel demand, we and our corporate customers have an improved position at the negotiating table, meaning we can make even more rates available to travellers. “
Fishman continued: “It’s also the right time to make sure a hotel program is fit for the future. More than ever, it’s about presenting travellers with relevant and personalized options. One might want the best rate, while another will prioritize amenities and experience.”
And he concluded: “Whatever choice they make, we want those guests to be recognized as Amex GBT travellers and to receive the highest level of service that status provides. We’re working with our accommodation partners to make that happen.”
Go to www.amexglobalbusinesstravel.com for more.