2009 Hotel Negotiations Outlook brightens for corporate buyers BCD Travel In Motion, September 2008 After four years of unprecedented rate inflation, the 2009 hotel negotiating season looks much more optimistic for corporate buyers. However, the picture is not completely rosy: in many cities worldwide, demand continues to outpace supply. Accommodation has been the fastest-growing segment of many companies' travel expenditure since 2004, but at last there is some better news for buyers. “The pendulum is swinging for the first time in several years from a supplier's market toward a buyer's market,” says Bob Brindley, vice-president of the Americas for Advito , the independent consulting arm of BCD Travel. Advito's annual Industry Forecast, to be published in early October just prior to the Association of Corporate Travel Executives Global Conference in Rome (with BCD Travel clients receiving advance copies of the document), will offer buyers strategies for negotiating with travel industry suppliers in the changing economic environment. In general, the hotel message is that buyers should press home their advantage where they find more favorable conditions. Companies which have embarked upon the request for proposal process for their 2009 accommodation programs are finding the negotiating environment easier this year, but those expecting outright rate cuts are likely to be disappointed . “The changing environment does not necessarily mean rates will go down but it will put the brake on the increases we have seen of late,” Brindley warns. Advito forecasts an average rise of 4 percent to 8 percent globally . However, that figure masks significant variations owing to widely differing trends in terms of both supply and demand. In the U.S., for example, where the recent economic difficulties have been most pronounced, demand is falling faster and therefore rates will stay flat or rise below inflation in many markets. The oil-based economies of the Middle East, on the other hand, continue to boom, and rates are set to jump by double-digit percentages once more. In other markets which have overheated over the past two or three years, such as India and China, rates will continue to rise but acceleration will be cooled by the opening of numerous new properties next year. “The first thing I would recommend is considering broadening your solicitation list to include more hotels in each city, but to consolidate your final selection to fewer hotels,” says Brindley. “Both of these strategies will provide negotiating leverage. In the past couple of years, if you needed a large number of rooms, some hotels looked on it as a negative, because they had so many different types of customer competing for their supply. That may have necessitated adding preferred hotels to make sure an adequate number of rooms were available for you travelers.  Now, if there are two hotels across the street from each other, they may be less sure they will both fill all their rooms, so you can get a much better price if you consolidate your business to just one of them.” Watch out too in the changing market for opportunities where hotels may be publicly offering “Best Available Rates” (BAR) that are below the corporate negotiated rate.   This may happen in greater frequency if demand continues to weaken. Buyers need to ensure their contract specifies that travelers will be offered the corporate preferred rate and BAR rates at time of booking. This does not always happen automatically for bookings that are not made through the agency. REGIONAL HOTEL FORECASTS FOR 2009 North America Generally speaking, rate rises will be 0 percent to 3 percent, especially in secondary and tertiary cities. In high-demand cities, rates will rise 4 percent to 6 percent. Most high-demand locations are primary cities (e.g. New York, , and Houston,), but in a handful of smaller locations, where demand is significantly outpacing supply and pushing up rates– e.g. Palo Alto, California. Europe Up 4 percent to 8 percent generally, with larger increases in some high demand markets.  Former Soviet Union Booming oil and gas business continues to force up demand and rate increases of 15 to 25% are forecast.  Middle East Still very high – expect 15 percent to 25 percent increases, and not only in the Gulf. Israel and Egypt are both set for growth of just under 20 percent. Asia Most major Asian markets will post increases of 10 percent to 20 percent, but in some locations the growth will be much smaller and there may be no rises at all. Beijing is expected to suffer a post-Olympics capacity hangover and there will generally be much more supply in China and India to help cool rate inflation. Latin America A complex picture. Rate increases of 10 percent to 15 percent expected in many markets but Mexico, Brazil and Central America will be 0 percent to 2 percent. Some secondary Brazilian cities, however, are experiencing significant rate growth owing to accelerating demand and limited room stock.                 Home | Business Travel | Demo Room | Reservations | Contact Us Travel Management Program | Groups & Meetings | Club Getaway ©1997-2008 Atlas Travel International. All rights reserved.