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HRG releases results from latest interim hotel survey

The latest interim Hotel Survey from Hogg Robinson Group (HRG), the award-winning international corporate services company, shows evidence of early signs of recovery in hotel rates but not to the levels expected by the market, in some cases four or five percentage points below what was expected.  Average room rates (ARR) have increased in [31/35] out of the top 50 cities.

There is, however, substantial disparity in performance across those cities.  North America has been the strongest performing region, with growth across all markets and in particular New York, Chicago and Toronto.  The Middle East and West Africa has continued to be affected by general uncertainty and increased capacity.

Margaret Bowler, Director, Global Hotel Relations at HRG comments: “The early sign of recovery in hotel prices is encouraging, what is a surprise however is that in certain key cities the rates are not as high as the market had expected – in many cities this is attributed to new supply. On the whole occupancy is increasing faster which, coupled with continued high demand, means we will be likely to see rates climbing in certain markets in the second half of the year and beyond.”

Key market trends noted this year include:
• For the tenth year running Moscow remains the most expensive city for business travellers with an ARR of £263.07
• Strong growth in the Oil and Gas industries, has helped Lagos retain its position as the second most expensive city and also substantial increases in Houston’s and Aberdeen’s ARR
• There are four new additions to the top 50 cities list this year – Toronto (26th), Athens (34th), Pittsburgh (46th) and Chennai (48th)
• Munich had the highest increase in ARR of 39.07%; however, this was driven by Bauma Fair, an international triennial event that attracts visitor numbers, far exceeding the number of hotel rooms available
• Within the UK market, only London, Aberdeen and Edinburgh recorded increases in ARR
• India is seeing a return to growth, especially in those cities which are also seeing growth in the outsourced IT sector and SME business

Margaret Bowler continues: “Once again we can see from the survey that regional trends are becoming less relevant than they were four years ago, with significant variance across regions. Interestingly the survey also shows the rise and rise of the megacity - 11 of the top 50 cities by room rate are also classified as megacities – and we are clearly beginning to see some marked differences between these and other cities that are popular business destinations.”

“The megacities are all showing strong growth driven by a number of common features.  Megacities benefit from a combination of classic business travel and high conference and exhibition traffic.  They also boast a good market for tourism and have specialised centres for industry segments such as oil and gas for instance. With the advantage of being able to cater for a variety of requirements, megacities can attract a more diverse range of business.”

“In comparison, other cities that are simply popular business destinations are subject to the general trend of the market and the consequences of wider economic pressures that would influence fluctuations in demand for example.  Some of the city positions in the top 50 league table reflect capacity and the availability of room space; limited new openings result in higher room rates (Moscow for example) whilst a number of new hotel developments results in a competitive rate market (as seen in Abu Dhabi).”

“Clients need to be aware of the rise and rise of the megacity and the impact this growth pattern and dynamic has on their hotel spend.”

“Whilst not uniform, the increase in average room rate highlights that travel remains an important part of winning and conducting business.  However, the below expectation increase in ARR is not likely to last and we expect to see further ARR growth into the second half of the year, and an interesting 2014 RFP season.”

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