2008: Hotel Rates on the Rise Globally

2007 has already seen a rise in hotel rates around the world, especially in the luxury hotel sector. According to Business Travel News, rates for 2008 are going to continue to rise especially at hotels outside of the United States for many reasons, including the decline of the value of the U.S. dollar, lack of supply in cities around the world to cover the demand, and blossoming economies in Europe, Middle East, and India.

Many luxury hotel brands have announced that they are expanding their hotels across the globe (See the Business Travel News article) but this will take time and may not have much affect on the growing demand until 2009. Luxury hotel brands, including InterContinental Hotels Group, Starwood Hotels & Resorts, Hyatt, and Marriott have announced that they will open as many as 600 properties around the world in the next few years.

So what does this all mean? It means that it is going to take more and more effort to find the really good offers and rates. And knowing where to look is going to be key. Lucky thing that Perfect Escapes knows where to look and, even more importantly, brings that knowledge to you.

Here is an abstract from the Business Travel News:

“Many travel buyers will start crunching numbers for the 2008 hotel request-for-proposals season over the next few weeks, and what they are likely to find are some hard figures. Demand continues to outpace supply in cities worldwide, with the problem exacerbated outside the United States by the declining value of the dollar, now below the symbolic figure of £0.50.

Even without the currency depreciation, rates have grown by double-digit percentages in many cities in Europe, the Middle East and India this year, covering locations as diverse as London, Madrid, Dubai and New Delhi.

Demand in many cities has outpaced forecasts, including London, which has recorded double-digit year-on-year rate growth every month since May 2006, according to TRI Hospitality Consulting. It had expected London rates to rise 4.6 percent in 2007, but the average for the first five months of the year proved to be 12.8 percent higher than the same period in 2006. U.S. visitors to London, deterred by the weakness of the dollar, are down 7 percent, but visitors from Europe, especially from the new EU member states, replaced them. TRI believes rate growth in 2008 will cool to a more modest 4.0 percent.

Reports regarding Paris are mixed…it remains the second-most expensive city in HRG UK’s list of average rates in Europe. However, rate growth so far this year has been a relatively modest 3.1 percent, according to TRI. Amsterdam also has a mixed story…TRI figures for the year to date put rate growth at 6 percent and predicted it will continue to rise.

TRI figures show Berlin up 8.3 percent for the year to date and Munich up 18.8 percent. The reason for the rate surge is a growth of 3.5 percent in German gross domestic product in the past year, with a rise both in domestic travel and in the increasing popularity of Germany as a hub for European business meetings.

Rome and Madrid are experiencing double-digit growth as well, with the closure of some Madrid hotels for refurbishment a likely reason there, and Helsinki is “commanding very high rates.”

Prague is one of the few rays of light for buyers, with overcapacity forcing rates down 2.3 percent, according to TRI. Rates in Budapest also are depressed: Its average of $138 is the lowest of any European city tracked by TRI.

Moscow remains the city of hotel buyers’ nightmares. Rates are more than 40 percent higher than Paris, and TRI put growth so far this year at 27.6 percent.

The Middle East average daily rate is up 10 percent to 13 percent with occupancy continuing to climb.

India’s rates continue to soar. “India really struggles with issues of supply,” said Chevalier. “The major hotel chains are all trying to keep up by building more properties but it is going to take years to level out. There is definitely going to be double-digit rate growth for another couple of years.” Wardlow cited Delhi and Mumbai as cities with especially acute capacity issues, but noted rates have eased slightly in Bangalore—the epicenter of the Indian hotel shortage—with the opening of some new capacity.”