Singapore hotels seem to be returning to
pre-crisis levels with the vibrant city-state leaping 19 places as
most expensive city in the world for business travellers,
according to the Global Hotel Market Survey from the Hogg Robinson
Results for H1 2010 shows that Singapore is
ahead of Beijing, but still cheaper than Hong Kong. Key trends
from the update include:
- Singapore jumped to 25th place as the
most expensive city in the world for travellers from the UK, a
leap from its 44th place ranking in 2009. The result reflects the
report of the Ministry of Trade and Industry which says that
average room rates in Singapore have risen by 20% this year.
However, Singapore is still cheaper compared to Hong Kong.
- Hong Kong became the third most expensive city in the world
for travellers from the UK, a rebound from its 10th place ranking
in 2009. It posted a growth performance of 13% in the local
currency due to increased demand from the Banking and Finance
sector. Hong Kong posted the highest increase in rates in both the
first and second quarters among all the cities surveyed-11% for
the first and 17% for the second.
- Moscow maintains
its standing as the most expensive city for travellers from the
UK, despite a decrease of 12% in the local currency.
Singaporeans may find it more cost-efficient to travel to Abu
Dhabi, as it falls to eight place this year, a downward trajectory
from its second place ranking in 2009. It saw the highest average
room rate reduction of 25% in the local currency.
Beijing's average room rate decreased by 18% in the local
currency. The city is currently facing an oversupply of hotel
rooms, due largely to massive investment from key industry players
who are keen to develop this market.
- Double digit
dips in average room rates occurred in the Middle East and West
Asian region due to a decrease in occupancy coupled with new hotel
James Stevenson, Executive Vice President (Asia
Pacific) of HRG, said, "Expectation is high for further
recovery in rates and the big hotel groups are understandably
working to return their rates to pre-recession levels. HRG has
witnessed companies reviewing and consolidating their travel programmes to secure lower hotel rates through increasing their
market share with a preferred hotel supplier. We continue to help corporates navigate a complicated market and ensure business
travellers have the best hotel deal."
Chief Executive of cebr (Centre for Economics and Business
Research Ltd.), a leading economic think tank which analysed the
HRG survey, said, "We are in the middle of a global economic
recovery which remains in a fragile state. Whilst the possibility
of a double-dip recession is relatively small, the pace of the
recovery varies significantly across the world. The latest HRG Hotel Survey illustrates the effects of a multi-speed economic
recovery in the hotel market. Many western economies are coming to terms with the budget cuts necessary to reduce sovereign debt
levels which will inevitably soften room rate growth.
"Dynamic emerging economies have less need to take fiscal
austerity measures in the current climate and we expect growth to
be higher as a result. However, the survey shows that emerging
economies have not, as of yet, fully recovered from the effects of
the economic downturn."
HRG's interim survey is based on a
combination of industry intelligence, actual room nights booked
and rates paid by its UK clients between January and June 2010
compared to the same period in 2009.
taking into account the effect of currency fluctuations, average
room rates vary significantly by city when compared to the same
period in 2009, revealing a very mixed performance across markets.
Six of the top ten cities managed to achieve average rate growth
when measured in local currency.
Moscow has maintained its
place at the highest average room rate for the sixth year despite
a 12% fall in local currency. Meanwhile, Abu Dhabi, which
in HRG's January to June 2009 survey was in second place and the
only top ten city at the time to record any growth (5%), has seen
a dramatic reversal, experiencing the highest average rate
reduction of 25%. Like Dubai, Abu Dubai has faced a substantial
fall in occupancy combined with ongoing new hotel developments,
set to continue for some time to come.
Hong Kong achieved
the highest growth performance in local currency terms, recovering
from an 18% decline in 2009 to growth of 13% in 2010, assisted by
a substantial increase in travel into the city from the Banking
and Finance sector. Rome, Copenhagen and Dubai (-7%, -10% and -12%
in GBP terms) drop out of the top ten, falling to 14th, 16th and
19th positions respectively.
exception of Dublin, where the average rate was static, when
broken down on a quarterly basis, all the key cities saw average
rates increase in the second quarter. Taken as an average across
all 12 cities surveyed, average rates fell by 2.5% in the first
quarter but grew by almost 5% in the second suggesting signs of a
recovery in the global hotel market.
The country showing
the highest increase in rates over both quarters was Hong Kong
with growth of 11% and 17%, whilst Zurich, Amsterdam and Stockholm
were the only other cities to record consecutive rate increases.
London's performance in the first quarter was adversely
affected by the heavy snow at the start of the year. However,
average rates grew in the second quarter due to a particularly
strong April as a result of the effects of the
ash cloud from the Eyjafjallajökull volcano and buoyant leisure demand.
While GBP rate
increases in Sydney and Johannesburg seem prominent at 24% and 20%
this result is due entirely to fluctuating Australian dollar and
Rand exchange rates; when measured in local currency, average
rates were either flat or showing a marginal 1% increase.
Stockholm managed to achieve rate growth due to a recovery in
occupancy levels and a lack of any significant new hotel openings
during the period.
Belfast and Beijing both suffer from an
oversupply of hotels, the latter having experienced massive
investment in recent years from major players keen to build a
presence in this emerging market.
Bangalore, a city
reliant on business travel associated with the IT industry and
call centres, is a classic example of a market 'popping' as it has
seen rates fall as a result of a drop in demand due to the global
recession coupled with significant new hotel openings which have
led to a current oversupply of rooms. Services apartments have
grown in popularity and some of the IT industry has relocated to
other areas in India.
exception of the MEWA region, the global hotel market has shown
signs of stabilising when measured in GBP.
showing the highest increase was Africa where average rates grew
by 16%, in part reflecting continued investment from global and
multinational organisations engaged in the Oil & Gas, Banking &
Finance and Telecoms industries in the region. Mostly, however,
this was down to exchange rate variances, particularly in South
Africa. The effect of the country playing host to the 2010 FIFA World Cup did not start to impact the rates until June.
Following a 17% fall in the first six months of 2009, average
rates in Eastern Europe have held relatively firm, largely due to
better performance in Moscow and strong results in Poland where
average rates increased by 9% (Warsaw +10%).
regional rate decrease was recorded in the MEWA region (-15%) with
double digit rate falls being recorded in the UAE (primarily Abu
Dhabi -26% and Dubai -12%), Bahrain (-14%), Qatar (-22%) and Oman
(-24%). As explained previously, the region has faced a supply and
demand issue and a substantial fall in occupancy combined with
ongoing new openings.
In the US market, where exchange
rates were relatively stable in comparison to the previous year,
rates were flat or marginally lower. The primary exception was San
Francisco, where average rates fell by 11%. UK average rates fell
by 1.2% or £1.25 per night, compared to the 5% decline seen in the
first half of 2009.
Global Hotel Star Rating
Analysis January - June 2010
Reflecting the need for cost reduction, average rates have
decreased in the 3 and 4-star markets as suppliers strive to
maintain their share of the corporate market and clients downgrade
between the star ratings as well as review their programmes and
renegotiate rates where possible.
The budget sector
achieved a rate increase of 3.75%, with the bulk of this growth
being achieved in the second quarter. As in 2008 the budget, 3 and
4-star markets are all targeting the same clients but the 3 and 4-star markets have the ability to respond at short notice both in
the packaging of rates and availability through flexible pricing.
This has resulted in instances where the budget sector hotels
aren't always the cheapest option when breakfast and other value
adds are factored in.
The 5-star market achieved a
marginal increase of 1%. Whilst there has undoubtedly been a trend
for corporates to turn to the 4 and even 3-star sectors in the
current climate, hoteliers in this sector have held out for rates
at the expense of lower occupancy levels, conscious that any
significant rate reduction has an adverse effect on service levels
as costs are brought in line, resulting in damage to a hotel's
reputation for quality and standards.
Margaret Bowler of HRG said, "2010 has so far proved an
encouraging year for the global hotel industry. The average length
of stay has increased by 9% suggesting that corporates have begun
to relax their travel policies in light of the perceived
improvement in the current economic climate. However, our data
shows that it is not consistent around the world and it is still
too early to predict how the rest of 2010 will pan out.
"In addition to lower pricing and in many cases last room
availability (LRA), corporates have been able to negotiate added
value items - or unbundled items as the airline industry puts it -
within their rates such as food and beverage discounts, free Wi-Fi
access and reduced parking charges. However, it is inevitable as
the industry recovers that yield management will come back into
play and suppliers will seek to unbundle further their pricing to
gain maximum revenues. Even in the current market, certain cities
are achieving high occupancy levels on peak nights and HRG
continues to advise clients to secure sufficient allocation in
high volume locations."
Margaret Bowler added, "Reflecting
the need for cost reduction, clients are downgrading between the
star ratings as well as continually reviewing their programmes and
renegotiating rates where possible. In the 3 and 4-star markets
average rates have decreased as suppliers strive to maintain their
share of the corporate market. We continue to believe that budget
options are not always the cheapest option when the add-on costs
are taken into account.
"With the uncertainty in the
market in 2009 the Request for Proposal (RFP) season was extended
with many corporates delaying issuing their annual RFP in the hope
that the market would continue to fall and more favourable rates
become available. With the recovery underway it is likely clients
will revert to the traditional RFP season. It will be interesting
to see how rate negotiations progress over the rest of 2010 ahead
of any further growth in the industry."
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