GLOBAL room rates rose at a slightly faster pace of 1.4 percent last year - up from 1 percent growth in 2011, according to a new survey by international corporate services company Hogg Robinson Group (HRG).
On 55 cities covered by the survey, 32 saw a year-on-year increase in local currency rates, a big jump on 2011, when 23 of the 55 cities recorded annual rate growth.
"While the overall pattern seems to be one of rising average room rates, regional trends, as demonstrated by the survey, are becoming less relevant as individual cities become bigger players in an ever-shrinking world," noted Stewart Harvey, group commercial director at HRG.
"It's interesting to see just how varied the picture is within regions, and even within different countries."
Across the globe, Moscow hotels remain the most expensive in the world for business travellers for the ninth consecutive year, and rates in global financial centers, including London, New York, Hong Kong and Singapore, climbed or remained stable during 2012 as confidence in the financial sector showed signs of improving.
In local currency, Rio de Janeiro and Sao Paulo in Brazil recorded the highest room rate increases though the rises were largely cancelled out when viewed in GBP.
Asia and the Americas registered overall hotel rates increases over the last year, whereas all other regions - Europe (with the exception of the UK), the Middle East, Eastern Europe and Africa - suffered declining rates, the HRG figures showed.
Europe (except UK)
The European picture is heavily influenced by the sovereign debt crisis, and as such it remains a tale of two halves.
Barcelona, Dublin and Athens have all reported hotel rate decreases as their economies remain fragile and susceptible to swings. Hotel room rates in Barcelona were especially volatile, showing a decline of 39 percent in the first quarter of 2012, before 32 percent growth in the fourth quarter, leading to an overall picture of flat year on yearly rates.
The resurgent banking and finance sector drove hotel room rates in Frankfurt up by 4 percent in local currency.
Room rates in Berlin were driven up as demand failed to keep pace with the German capital's growing convention market, which included two major international conferences in September.
Room rates in Hamburg fell by 4 percent in local currency as the city dealt with its capacity issues through an investment in over 1,000 new hotel rooms.
Rates in Paris remained largely flat, having suffered a drop-off in convention business at the beginning of 2012. Demand for hotel rooms in the city picked up in the second half of the year, contributing to an overall rise of 1 percent in average room rates for the year.
The HRG View:
"As European economies tackle the lingering effects of the recession, there is a significant disconnect between northern and southern markets. More established markets, like Frankfurt and Berlin, are showing signs of recovery, but cities such as Athens and Dublin are struggling to maintain high rates as there is an oversupply for the current demand."
Five of the UK cities surveyed have seen an increase in average room rates, with Belfast leading with an 8 percent annual rise. The room rate increases were mainly a result of the "Titanic Effect" in the first half of the year, which saw events taking place to mark the anniversary of the liner sinking.
Average room rates in London grew steadily in 2012 and saw an overall 5 percent increase. Unsurprisingly, the largest single spike in average room rates took place during the Olympics, but it was the relative strengths of the banking, finance and corporate sectors, which drove sustained demand for hotel room capacity in the capital. London's financial district has seen quite a number of new openings. While they have not driven rates into negative territory they have held back the increases to a more modest level.
In Liverpool, which saw a rise of 5 percent, the rise in the average room rates was due to increased shipyard activity and a major jobs boost for the city's automotive industry at the beginning of the year.
Aberdeen's thriving energy and oil sector also drove strong demand for hotel rooms in the city where average room rates advanced 5 percent.
"The Olympics clearly had an effect on hotel rates in London, but this is by no means the only factor which contributed to the 5 percent rise in 2012. London's status as a global financial center has undoubtedly played a role in stimulating demand and driving rates up. There are some questions over what will happen in 2013, following all the new hotel openings in London last year. Initial signs are that average room rates in the UK capital may soften, which will benefit many corporate travellers visiting the city."
After several years of decline, room rates in Dubai are rebounding as business travellers are now beginning to return. With many high-profile hotel projects effectively mothballed over the past two years, the lack of new capacity has now begun to squeeze supply. Several new hotel openings in the fourth quarter eased the pressure on existing capacity, but issues of availability are still particularly acute in the long-stay corporate apartment sector.
Abu Dhabi and Istanbul rates have decreased due to increased supply, particularly in the mid-market. In addition to Istanbul's 1,000 new hotel beds, the city is experiencing a decline in demand as the crisis in neighboring Syria worsens.
Room rates in Cairo fell abruptly in the first three quarters of 2012 as business travellers stayed away. Room rates in the first quarter of 2012 dropped by 12 percent, but early indications in the fourth quarter suggested the corporate community is beginning to return to the region.
The HRG View:
"The Middle East is a diverse region, and as such, has different issues impacting business travellers and hotel rates. On the whole, the industry is still growing and even Dubai has gaps in the lower category hotel segment being filled by three and four-star chains. The future is bright and emerging markets like Libya and Iraq are planning aggressive expansion and growth in the hotel industry with big chains jostling to open properties."
With one or two exceptions, the picture from the US suggests an increasingly confident outlook which is driving international business travellers to the region's key cities.
Room rates in New York grew steadily throughout the year. Even superstorm Sandy did not hold rates back from rising 2 percent year on year. San Francisco and Atlanta hotel rates rose sharply due to a series of city-wide conventions combined with a lack of new openings.
Houston had a bumpy start to the year when a major global airline moved its headquarters away from the city. The resulting drop in demand meant room rates dropped by 8 percent in the first quarter. Houston's thriving energy and oil business, and a major conference in the second quarter, kept demand high for the remainder of the year and led to an overall rise in room rates of 7 percent.
In Washington DC hotel rates dropped significantly over the year due to decreased corporate demand.
The HRG View:
"In North America, hotels approached negotiation season with a very bullish attitude, leading to high rate rises. Hotels are also paying more attention to cancellation deadlines, which is placing a further squeeze on rates. With a lack of openings due to the major groups focusing on other parts of the world, the squeeze on rates is likely to continue."
Bangalore, Mumbai and New Delhi have all been impacted by the slowdown in the Indian economy. Investment in hotel capacity during the boom years has led to an over-supply of hotels. Many corporates are also moving out of hotels to long-stay serviced apartments in these cities.
Hyderabad was the exception with a fairly strong first-half year, mainly due to increased demand driven by the IT and new technology industries based in the area. From the third quarter it started to see a reduction in average room rates mainly because of the economic slowdown and oversupply of hotels.
Tokyo continues to rebound after the 2011 earthquake and tsunami. The city saw a 30 percent plunge in demand in the three quarters that followed. Reconstruction and recovery efforts have led to even more corporate activity in the city, which will continue to be a springboard for revitalization in 2013. A gradual upturn in confidence across the banking sector has driven an increase in business travel to the city.
Beijing is now a relatively well-served and mature business travel destination. Hotel rates in the city continue to rise at an above average rate, but not at the levels seen in previous years.
Shanghai has seen a marked decline in average room rates from 2010 and the World Expo when many new hotels were built.
Room rates in Hong Kong were flat, but it remains one of the world's most expensive corporate travel destinations.
The HRG View:
"The hotel market in the Asia Pacific region has displayed resilience over the past months. However, with the uncertainty in the global economy and the slowdown in business, the hotel market in the region is slated for a period of slow growth as organizations become more cost-aware. Singapore is the one exception - hotel rates in the city are expected to rise in 2013 as numerous mega-conferences attract an increased number of business travellers."
New hotel openings in Lagos have gone some way to ease pressure on capacity, but average rates remain some of the highest in the world. Security is a significant concern in the oil-rich Nigerian city, so business travellers are advised only to stay in one of the few, high-end hotels there.
In Nairobi, hotel rate increases have been arrested by investment in new hotels. More than 1,100 rooms are due to enter the Nairobi market before 2014, but international business travel to the region is becoming more expensive in real terms as the local currency appreciates in value.
In Johannesburg, the effects of an oversupply of hotels following the 2010 World Cup is still having an effect, whereas Cape Town's decreased rates are due to a slow convention year and good quality lower-star hotels. Weakness in the local currency means that many business travellers to the region can expect some very good deals.
The HRG View:
"The hotel industry has its eyes on Africa and nearly all of the major hotel chains are planning to expand in the region. Nigeria is receiving the most investment, as the oil industry drives heavy business travel to Lagos, pushing up hotel rates. These higher rates also reflect travellers' desire to stay in secure, five-star accommodation to overcome any security concerns."
Over the last year, hotel room rates in Latin America have increased significantly as business travellers turn their attentions to the lucrative opportunities in the region. While room rates are increasing at double digit rate in local currency, a weak exchange meant international business travellers were largely shielded from any price hikes.
Rates in Rio de Janeiro and Sao Paulo rose by over 19 percent and nearly 16 percent respectively, though the comparative weakness of the Brazilian Real means these rises are effectively cancelled out when looked at in GBP. Both of Brazil's largest business centers are experiencing a strong upsurge in demand, but have yet to address issues of capacity. In Sao Paulo, for example, the last luxury brand hotel to open was 10 years ago. However, new builds are starting apace due to the forthcoming World Cup and Olympic Games which will then leave impact on rates.
Room rates in Mexico City jumped by 30 percent in the first half of 2012, though demand softened considerably in the second half of the year due to the seasonality of convention business in the region.
The 8 percent rise in room rates reported in Buenos Aires was linked to a strong convention season, with the international motor show "Automechanika" attracting over 42,000 international delegates to the city in the fourth quarter.
The HRG View:
"The Latin American business travel market continues to do well because it has not been impacted by the financial issues that have impaired other parts of the world. Brazil may not be growing as quickly as two years ago, but it remains a priority growth market, whilst Columbia and Peru are certainly markets we will watch closely during 2013. We expect the Latin American hotel sector to remain bullish, particularly as it positions itself as a top large-scale event location."