Will Global Hotel Rate Drop Translate Into New Business?
by Dawn M. BarclayWith hotel prices the lowest they’ve been since 2003, are companies booking more incentives and meetings?
The average price of a hotel room was 14% lower in 2009 than in 2008, according to the Hotels.com Hotel Price Index. Travelers spent:
* 13% less on hotel rooms in Europe during 2009 than in 2008,
* 14% less in the U.S.,
* 16% less in Asia
* 21% less in Latin America
In fact, the average price of a hotel room across the world was cheaper in 2009 that it was in 2004, when the HPI began. However, towards the end of 2009, the rate at which the average price of hotel room fell started to slow down. The average price of a hotel room fell by just 7% year-on-year in Q4 2009, compared to 16% in Q1, 17% in Q2 and 14% in Q3.
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“It is definitely a ‘buyers market’ and the economy is driving most incentive travel decisions,” said Sean J. Mahoney, president of the Global Board of Directors for the Society of Incentive Travel Executives. “Corporate executives and meeting planners are seeking the ‘ultimate deal’. Whether or not the timing is right to implement programs depends on the corporation and attitudes about incentive travel. Some companies are still hesitant about ‘reward travel’ given lingering negative perceptions. Some simply aren’t spending because they are still “recovering”. Yet others have discovered that incentive travel is the ‘solution’ and not the ‘problem’. The landscape has definitely changed. There is a renewed emphasis on transparency and measurement… both of which help to validate the use of incentive travel programs as an effective management tool.”
Currency also plays a part in affordability.
For travelers paying in US dollars, Dubai became a more attractive destination in 2009 as hotel rates in the city fell 25% from their level the year before. Rates in Abu-Dhabi also dropped for those buying rooms with US dollars, falling by 17% year-over-year, lower than for any other currency.
Asia Pacific nations were also on sale last year. Those heading to Singapore with US dollars in their pockets saw prices take a downward turn by 28% in 2009 compared to 2008. Beijing posted across the board decreases in average hotel room rates in 2009 in the wake of the Olympic Games hosted in the city in 2008. Prices were down 29% year-over-year for travelers paying in US currency; 32% year-over-year for travelers paying in Euros; and 37% year-over-year for those purchasing in Japanese Yen. Shanghai fared slightly better with year-over-year average room rates down by 14% for travelers paying in dollars, 12% for travelers paying in Euros and 23% for those purchasing in Japanese Yen.
Hong Kong also became a more affordable destination for travelers, especially those purchasing hotel room nights in Japanese Yen. The destination posted year-over-year average room rates decreases of 22% year-over-year for travelers paying in Japanese Yen, 20% for travelers paying in US Dollars and 20% for those purchasing in Euro.
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David Roche, president of Hotels.com, commented: “Step inside the time machine, turn the dial back to 2003, and compare hotel prices then and now. What’s changed? Not much. Our latest Hotel Price Index, covering all of 2009, shows that prices fell globally by 14% on already weak 2008 figures, bringing consumer prices back to levels not seen since 2003. Despite some possible first signs of hotel prices recovering in Europe and the US in the last quarter of 2009, the promotions and great value look set to continue for some time yet. 2010 promises to be another great year for the traveler.”
If planners are going to book incentives based on these price downturns they’d better start now. Price falls started to level off towards the end of 2009 particularly in Europe and North America.
While hotel prices had fallen by double digits in the first three quarters of 2009 on both continents, by Q4 the rate of price falls was in single digits in both Europe (down 6% in Q4) and North America (down 7% in Q4). Prices continued their slump in both Asia and Latin America though. In Latin America prices fell by 10% year-over-year in Q4 whereas in Asia, the level of price falls experienced by hotels actually accelerated in Q4 2009 compared to the previous quarters. Hotel rates dropped 19% in Q4 in Asia compared to 17% in quarters two and three and 15% in Q1.
When asked if this newfound affordability was making a difference in interest and requests for international meetings and incentives, reaction was mixed.
“We are definitely seeing a spike in bookings for the end of 2010 right into 2012,” said Michelle Anseeuw CMP, CHSP, MBA, the vice president, global sales for the Florida-based hotel and DMC-representative, the Valorem Group. “Associations and corporations are now reconsidering international destinations whereas in 2008 through the beginning of 2010, they were only considering domestic US, not even the Caribbean or Mexico… [Clients] can’t ignore that they’re getting so much more for less and if associations are seeking new members from, say, the Asia Pacific region, for example, they need to get closer to the membership base that they want to target and grow.”
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Jennafer Ross, CMP of JR Global Events agreed that the price drop “absolutely” had a positive effect. “Dollars are going to talk. If we can take a group to Europe for the same price as it would have cost to travel domestically, and still stay at mid-tier hotels or better, then sure, we’re going to go overseas. I need to be able to show value but still deliver high level quality events for well-travelled attendees, who expect a five-star event on a dime budget.”
Loretta Lowe, a San Francisco-based independent planner was less convinced. “Nope,” she said, when newfound affordability was mentioned. “I have a group going to London in a few months; we’re not seeing much of a reduction. Anyone who does international meetings is used to the constant rollercoaster of exchange rates. Up one day; down the next. It won’t be until we have many months of sustained reduction before a conscious choice of picking an international destination due to price would be made. Even with the minor reductions, the Euro has been so inflated against the dollar that it might not be necessarily less expensive than keeping a meeting in the U.S,” she added.
Hotels.com said that its international scale makes the Hotel Price Index one of the most comprehensive benchmarks available, as it incorporates both chain and independent hotels, as well as options such as self-catering and bed and breakfast properties.
The HPI tracks the real prices paid per room by Hotels.com customers around the world using a weighted average based on the number of rooms sold in each of the markets that Hotels.com operates in.
Full details of the Hotel Price Index can be found at http://www.hotels.com/press/hotel-price-index.html.
