April 22, 2024

New rates of interest

Peter Grover, TRIPBAM Managing Director EMEA, shares his predictions on hotel pricing trends

One thing I have been asked several times recently by travel managers is “What can we expect rates to do in the near term and into the future?” While I unfortunately possess no crystal ball to give a 100% definitive answer, our recent data does reflect some trends and give some hints as to what we might expect.

Certainly, one trend we are seeing today is that supply is outpacing demand. From an all-time high of 45,000 hotels listed in our global Closed Hotel Report in mid-April to our most recent count of less than 4,000, properties around the world have been reopening their doors. While this is a positive sign for the industry, any increase in corporate travel has certainly not kept pace. In Europe, the only sectors that appear to be travelling at any notable volume are in or related to healthcare, with some movement from smaller and mid-sized companies too.

This supply and demand imbalance is evidenced in many negotiated static rates now being above the retail rates for those same rooms. Our data is indicating that in the current environment, you can expect a decrease in retail rates by 30% or more.

Another indication has been the increasing creativity on behalf of individual properties in a bid to attract what little corporate travel activity is now underway. We’ve had clients – namely major corporations – offered whole floors for their travellers’ exclusive use. We’ve also seen the inclusion of dining vouchers for meals (in addition to breakfast) in hotel restaurants, particularly in the APAC region.

“To add to the pressure on hoteliers, costly cleaning measures have been necessary to adhere to chain/brand, local government or other industry or association standards”

To add to the pressure on hoteliers, costly cleaning measures have been necessary to adhere to chain/brand, local government or other industry or association standards. Since cleaning typically happens between stays in the current environment, rather than on a daily basis, this has resulted in measures such as minimum two-night stays for some properties in the Middle East. While we’ve yet to experience this, it’s not a stretch to imagine the much-maligned resort fees experienced in the U.S. may become a model for “cleaning fees” to offset some of these new costs.

In terms of changing behaviours and/or policies when employees do travel, we can imagine the single day or one-night stay being supplanted with longer durations, grouping multiple meetings into a single trip. We’ve already seen this start to emerge with an increase in the average length of stay among TRIPBAM clients, from 2.4 nights in 2019 to 3.4 nights in 2020. A hot topic of discussion has been whether an increased length of stay coupled with cleanliness concerns among corporate travellers will increase demand for extended stay and corporate apartments. If this is the case, hotels that may not have previously viewed these types of accommodation as competition may regard them as such in the future or look to convert some of their inventory to support this increasing demand.

In summary, all signs indicate that depressed and volatile hotel rates are here to stay for the foreseeable future. Until a vaccine is delivered around the world, and demand begins to rebalance with supply, travel managers would be well advised to seek lower rates through negotiation and the introduction of dynamic discounts.

Peter Grover is Managing Director EMEA for TRIPBAM, the hotel rate auditing, analytics and sourcing provider based in Dallas. TRIPBAM shops across multiple hotels over several days to help companies take advantage of price changes.