The global hotel industry is enjoying a growth phase and showing signs of a strong performance recovery – according to a new survey by the UK’s leading corporate travel management company, BTI UK.

The survey revealed exceptional hotel room rate increases in Moscow and Bangalore (29% and 42% respectively), reflective of Russia and India’s increasing business development prospects and growing importance to business travellers.

This ongoing economic activity ensured their entry into the global top three most expensive cities, with Moscow topping the poll with the highest hotel room rates worldwide.

Other key survey findings include:
• Paris slips down the ‘most expensive’ table to fourth place
• Budget hotels continue to outperform four and five star properties
• India is highlighted as a growth market with demand far outstripping current availability
• Most Chinese cities are experiencing double digit growth year on year
• USA rates remain static despite favourable exchange rate but further growth is expected
• Travellers are planning their itineraries further in advance, but cancelling hotel bookings nearer to the date of arrival

BTI UK’s survey is based on a combination of industry figures, actual room nights booked and rates paid by its clients during January – June (inclusive) 2005.

Margaret Bowler, General Manager of Hotel Relations at BTI UK, comments: “Overall the global hotel industry continues to show clear signs of recovery. Eastern Europe and Asia Pacific have seen particularly strong growth which is indicative of increased business activity in these regions.

“Looking to the UK and following a positive start to 2005, there are early indications that the recent London bombings are likely to impact the country’s key business destinations, with increases in hotel bookings in provincial towns and cities. The extent of the shift out of the capital will become apparent towards the end of the year.
“Exchange rates have been a major factor in declining average rates in the USA in recent years. However, as the US dollar strengthens key cities are starting to see growth in their average rates.”

In-Depth Analysis
Top 10 highest global average room rates:

In the first six months of 2005, Moscow replaced Milan as the city with the highest average room rate (BTI UK Hotel Survey, 2004). Rome is now the most expensive Italian city for business travellers and its current popularity as a conference and meeting destination positioned it as the second most expensive city worldwide for business travellers.

The appearance of Moscow, Rome and Bangalore, along with new-entrant Athens, push Zurich, Copenhagen, Frankfurt and Amsterdam out of the Top 10 most expensive list. Bangalore’s number three position is reflective of its overall economic growth with BTI UK noting particular activity in the banking, finance and IT sectors. London remains static in 7th position, despite a 6% increase in average rates.

Average room rates by region:
Average rate increases across all regions are a key indicator of the global recovery in the hotel market. The average hotel room rate worldwide now stands at £107.74, up 6% from last year (based on BTI UK figures). Eastern Europe has recorded the highest regional hotel rates, up by 27%, in part as a result of rate movements in Moscow. Substantial increases have also been recorded in the Middle East & West Asia (MEWA) and Africa regions. Comparatively, last year only the UK, Europe and Africa showed any growth.

Key Country Focus
United Kingdom
Last year all key UK locations surveyed by BTI UK experienced rate increases and this positive trend looks set to continue. Leeds and Cardiff are the only two cities to have noticed a decrease in average costs, largely due to the fact that both cities have seen an increase in the number of rooms available due to the expansion of existing properties and new openings.

London, which is leading the recovery in the UK, experienced a 6% increase in average rate year on year. When compared to the same period in 2003, the figure rises to over 18%.

China
Most Chinese cities have recorded double digit growth when compared to the same period in 2004. Volumes are expected to grow based on the growing number of business travellers visiting the country and rates in Beijing are particularly expected to see large increases as the city hosts the Olympics in 2008.
Brand recognition and loyalty, highlighted by experts as critical within the Chinese market, will continue to be key as major hotel chains announce aggressive expansion plans.

India
India is currently seen as a huge growth market, with demand for hotel rooms far outstripping supply. Key cities, such as Bangalore, have seen major investment from the UK with many companies introducing or re-locating their operational offices into the country.

Volumes in India have increased in tandem with new airline routes and activity and in response many major hotel chains have announced large expansion plans covering all property levels and star ratings. However, outside the key commercial cities, the hotel industry in India is still highly seasonal.

Travel booking lead in times:
BTI UK’s research indicates that the majority of bookings (30%) are made between 4-7 days prior to arrival, with only 10% of bookings made on the day of arrival. This shift toward longer lead in times reflects a realisation that lower tactical rates are no longer available to the extent they were in 2003/04 and that those leaving bookings to the last minute run the risk of paying rates higher than those contracted.

Interestingly, more bookings are made on the day of arrival to Eastern Europe than are made domestically within the UK. The number of bookings made on the day of arrival within the Americas and MEWA regions is also high whilst the majority of visits to the ASPAC and African regions are made two weeks in advance, reflective of the length of time involved in reaching these destinations.

Global cancellation lead times:
From January to June 2005 10% of all bookings made through BTI UK were subsequently cancelled, this is in line with all travel management companies in the industry. Nearly half of these bookings were cancelled within 48 hours of arrival at destination, highlighting the pitfalls of booking restrictive promotional and Internet rates which often carry with them significant cancellation penalties. Bookings within the UK are cancelled nearer the date of arrival than elsewhere in the world, while the majority of cancelled bookings to North American destinations are cancelled more than seven days prior to arrival.

“It is encouraging that our research suggests that travellers are planning their itineraries further in advance as they become aware of the issues surrounding availability and cost,” comments Margaret Bowler.
“However, it is noticeable that travellers are cancelling unwanted bookings nearer to the date of arrival which causes availability problems as rooms are only available at the last minute.”

Hotel Star ratings:
Average room rates continue to increase across all star ratings, with the highest increase (8.8%) experienced in the budget sector and the lowest increase in the four star market. This reflects organisations’ preference to downgrade their accommodation as the budget sector continues to expand and upgrade and is in line with their policy requirements.

Despite being in decline for the past 18 months, the five star market is now showing signs of recovery. This is forecast to continue as major developments are planned, particularly in the ASPAC and MEWA regions.

Summary:
Margaret Bowler concludes: “The results of the BTI UK survey show clear signs of growth and recovery in all world markets. Given this strong position we recommend that clients carefully assess their hotel programme and policy to ensure they are in the very best position when it comes to negotiating rates with suppliers for 2006.

“It is likely that major hotel groups will be assessing client accounts not merely by potential volume, but also according to the profile of the account in terms of value. The long held presumption that high volume equals low rate is no longer necessarily true in today’s market and companies should look to their travel management company to provide guidance and quality data.”

She continued: “With occupancy levels set to rise further, clients looking to achieve cost savings will need to ensure their travellers stick to their mandated policies to ensure they can demonstrate clear volumes to their preferred suppliers or look at downgrading to less expensive properties.”