Most corporate and contract rates are negotiated during September through December, but based upon preliminary discussions, it is clear that there are very different buyer and seller expectations. Corporate and contract rates represent almost 20 percent of occupied room nights and almost 30 percent of U.S. lodging industry revenue. The difference between buyer and seller expectations for corporate and contract rates for 2012 is as far apart as ever before – even more than last year.
TREND ANALYSIS REPORT
Corporate Hotel Rate Negotiations for 2011 – Preliminary Outlook
August 10, 2011
By Dr. Bjorn Hanson, Divisional Dean, Clinical Professor, HVS Chair
The Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management | NYU School of Continuing and Professional Studies (NYU-SCPS)
Most corporate and contract rates are negotiated during September through December, but based upon preliminary discussions, it is clear that there are very different buyer and seller expectations. Corporate and contract rates represent almost 20 percent of occupied room nights and almost 30 percent of U.S. lodging industry revenue.
The difference between buyer and seller expectations for corporate and contract rates for 2012 is as far apart as ever before – even more than last year.
For 2011, the average negotiated rate increased approximately 4.5 percent, which is greater than what will be achieved by U.S. hotels based on year-to-date performance of 3.5 to 4.0 percent.
The emerging hotel executive consensus outlook for 2012 is for corporate contract rates to increase by a national average of 6.0 to 8.0 percent or more, but many corporate travel managers are planning for increases of 3.0 to 5.0 percent.
A preliminary estimate for the result of negotiations is for an average increase for corporate rates around 5.0 to 6.0 percent depending on location and the number of room nights for a specific buyer. New York, for example is likely to be a location with a larger increase. Hotel executives also are seeking to charge separately for some services and amenities as they had in the past, in addition to implementing rate increases. In recent years, some contract rates included services and amenities such as waiving charges for telephone access charges, fax charges (which can be difficult for some hotels with business centers operated by lessees and would require hotels to pay for the service for guests), fitness centers, breakfast, local transportation, and others.
One response of buyers to higher rates is to reallocate the portfolio of contract rate hotels to include more upscale, select service and limited service hotels in place of luxury and upper upscale hotels, for example.
These estimates are based on selected interviews with industry executives and corporate travel executives, analysis of industry financial data, press releases, and information available on hotel and brand websites.
EDITORS: To interview Dr. Bjorn Hanson about this research or for more information, please contact Cheryl Feliciano at Cheryl.Feliciano@nyu.edu or 212-922-9103 or Suzanne Dawson at firstname.lastname@example.org or 212-329-1420.
About the Author
Bjorn Hanson, Ph.D., divisional dean, clinical professor, and HVS Chair of the hospitality and tourism management program at the NYU-SCPS Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management, is a hospitality and travel researcher, widely respected for his industry forecasts and for having created econometric models that transformed business analysis in the field. Prior to joining NYU-SCPS, he held the position of global industry leader, hospitality and leisure, at PricewaterhouseCoopers LLP.
About the NYU School of Continuing and Professional Studies
Established in 1934, NYU-SCPS (www.scps.nyu.edu) is one of NYU’s several degree-granting schools and colleges, each with a unique academic profile. The reputation of NYU-SCPS arises from its place as the NYU home for study and applied research related to key knowledge-based industries where the New York region leads globally. This is manifest in the School’s diverse graduate, undergraduate, and continuing education programs in fields such as Real Estate and Construction Management; Hospitality, Tourism, and Sports Management; Global Affairs; Philanthropy and Fundraising; Graphic Communications Media, Publishing, and Digital Arts; Human Capital Management, Marketing, and Public Relations; with complementary strengths in the Liberal and Allied Arts; Translation and Interpreting; Management and Information Technology; and Finance and Taxation. More than 100 distinguished full-time faculty members collaborate with an exceptional cadre of practitioner/adjunct faculty and lecturers to create vibrant professional and academic networks that attract nearly 5,000 degree-seeking students from around the globe. In addition, the School fulfills the recurrent continuing higher education needs of local and professional communities, as evidenced by 55,000 annual enrollments in individual courses, specialized certificate programs, conferences, workshops, seminars, and public events. The School’s community is enriched by more than 25,000 degree-holding alumni worldwide, many of whom serve as mentors, guest speakers, and advisory board members.