Average Room Rate (ARR) increases continue to be driven by “megacity” growth as regional and national trends diminish, replaced by the economic and industrial strengths and weaknesses of individual cities.
Room rates in 37 of the top 50 cities increased when measured in local currency, however much of this growth has been driven by significant movements in exchange rates, with only 13 cities seeing an increase in GBP.
The HRG View: Margaret Bowler, Director Global Hotel Relations, “HRG’s Hotel Survey reveals just how important it is for clients to have a firm grip on their hotel programme. As we said last year, the balance between price, location, quality and availability is crucial and this will continue to drive the market in 2015. By working with us to continuously review their corporate hotel programmes, clients can improve control and compliance while making sure the programme remains flexible and adaptable to complex and fragmented market conditions.
“The market is incredibly varied with regional and even national trends continuing to be replaced by micro trends effecting individual city performance. At the same time, Hotel Groups are continuing to focus on increasing their average rates across the board. Clients need to ‘mind the gap’ in their negotiations, ensuring they are getting the right hotel, in the right location, at the right price.”
Key findings from the annual survey include:
• Moscow remains the most expensive city for the 11th consecutive year, despite nearly a 4% year on year fall in ARR to £249.11. However, this fall was masked by considerable local exchange rate movement due to the effects of economic sanctions and the ongoing crisis in the Ukraine, translating to a 21.88% rise in the Rouble.
• The Middle East & West Africa and Asia have both seen ARR growth, while Europe, The Americas and Africa have once again seen ARR move backwards. However, once again cities within each region continue to see large disparity in terms of ARR movement, reinforcing the trend of increasing “megacity” performance.
• The top ten Financial centres experienced mixed results in 2014, reflecting the wider global economic situation, with six cities witnessing ARR growth and four moving back slightly.
• The story of rising rates across the majority of the UK continued in 2014 with eight of the top ten cities experiencing ARR growth.
• London, however, experienced a small drop of 0.72% in ARR throughout the year, despite witnessing growth of 5% in the first half of the year. Further analysis highlights substantial movement from upscale properties (-5.17% ARR var) to their midscale counterparts (+2.55% ARR var).
• Aberdeen, which has for a long time been a powerhouse driven by the Oil & Gas sector, experienced ARR growth of 9.61% in 2014, although this is down from the 11% growth rates seen in the first half of the year. With the impact of falling oil prices and increased bed stock in the region, it is likely that the market will continue to soften.
• The North American market continues to perform strongly with ARR in local currency increasing in many locations. In particular, Miami continues to benefit from being a global gateway city with links to every major market resulting in corporate and leisure demand pushing rates up 9.15% locally.
• Canada was impacted by new bed stock with reductions in local ARR in Vancouver (-3.41%), Montreal (-0.97%) and Toronto (-0.61%) despite a large exchange rate variance.
• The burgeoning IT sector in Hyderabad continues to drive up demand with the city experiencing a modest rise in ARR in GBP. This coupled with a large exchange rate movement saw a large increase locally of 11.17%.
The HRG View: Margaret Bowler, Director Global Hotel Relations “So what do these findings mean for our clients? Firstly, in a market driven by micro trends, what works in one city is not necessarily going to work in another. It is increasingly important for clients to not only maintain control over the overall hotel programme, but to adopt flexible policies based on what is happening in individual markets.
“Our advice is that they need to concentrate and focus their efforts on directing business to preferred proprieties, not simply with preferred groups. In some circumstances this will mean limiting the number of properties in some cities. By driving compliance, capturing data and benchmarking against city averages, clients will be in a better position to fine tune their policies and get the best results from their hotel programme.”