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Hotel prices in key cities see modest rises despite threat of Airbnb

The hotel industry is booming, according to The Hotel Monitor 2020 report from American Express Global Business Travel.

Emerging trends show that business travellers are looking for accommodation with working spaces and an informal environment which has good Wi-Fi connections.

A fightback against short-term apartment lets in some European cities is highlighted by the study, which also explores the role of technology in corporate lodging, and charts the rise of non-traditional hotel options.

The popularity of alternative accommodation such as Airbnb is growing as the company expands its platform to include hotels and serviced apartments.

“Certainly, Airbnb has impacted traditional hotels. Recent research found that every 1 per cent increase in Airbnb properties decreased hotels RevPAR by 0.02 per cent – which would have lowered hotel revenues in New York by $365m in 2016 alone,” David Tanner, senior manager, thought leadership, global business consulting at American Express GBT, told M&IT.

“However, I’m not sure Airbnb actually represents an existential threat to the traditional hotel model. Hotels are still doing well and much of what they deliver will be hard for Airbnb to replicate. Hotels remain the accommodation of choice for the large majority of business travel programmes, meeting duty-of-care requirements, offering consistent and reliable standards, facilities and services, and opportunities for volume-based negotiations with corporate customers.”

Hotel prices in most key cities will see modest rises in 2020. An international increase in hotel construction is increasing the supply of guest rooms, while international trade tensions curb demand. The effect will halt the ability of hotels to increase room rates in many business destinations.

Traditional business hotels still the preferred choice of business travellers.

Traditional business hotels are still the preferred choice of business travellers.

Hotel development is at a record high in Europe, according to the report. Germany is leading the development boom with 379 projects in the pipeline. The UK follows closely behind with 281 hotels in the works. London will see a further 10,000 new rooms open in 2019 and 2020.

“In spite of uncertainty related to Brexit, London is still a global business hub and centre for tourism, sport and cultural events. Sustained demand has allowed London to maintain high occupancy rates. However, the average daily rate (ADR) has risen slowly on account of the steady increase in supply,” Tanner said.

Digital innovation in the hotel industry is seeking to keep pace with the demands of business travellers. The Hotel Monitor 2020 identified that there is a growing preference for properties which offer communal working spaces in a relaxed environment

“Shared working spaces is primarily being driven by digitally savvy, experience-driven millennials,” Tanner suggested.

“With an emphasis on experience, these hotels feature open, communal spaces offering casual and/or self-service food options – they feel more like lounges or libraries than traditional lobbies. This also aligns with the higher likelihood of Millennials to combine business and leisure travel from the same location. Some new chains in this space are Canopy by Hilton, Hyatt Centric, Moxy by Marriott, and Aloft by Starwood.”

Another trend observed across the globe by Hotel Monitor 2020 is the growing tendency of the major hotel brands to invest in new lifestyle formats to attract modern business travellers. These less formal environments offer an alternative to traditional corporate travel hotels.

Digital essentials

Technology is driving change across every area of hospitality, from sourcing to the traveller experience, Tanner suggested. “At the heart of everything is data and analytics. It means hotels can know travellers and understand their preferences as never before. This is critical in anticipating traveller needs/wants and create personalised offers/benefits to drive stronger traveller relationships. For instance, some hotels have been experimenting with smart rooms that that proactively adjust their settings to the preferences of an upcoming guest.

“Mobile is another critical technology: the mobile device is the key driver of traveller experience, especially with younger travellers, and provides hotels with a direct point of contact with the traveller. Many of the new technologies that hotels are developing are linked to mobile. These include self-check-in, keyless entry via a mobile device, and two-way chat for services; and are generally reserved for loyalty members, again aiming to strengthen the traveller relationship.”

In the Hotel Monitor 2020 report, the global business consulting team at GBT identifies three areas where technology is helping hotels transform their offering and explores some implications for corporate travel buyers.

Artificial Intelligence (AI) – hotels are investing in Artificial Intelligence (AI) and deploying it throughout the guest journey to drive value and differentiation. Examples include augmented reality to visualise hotel rooms before booking, check-in using facial recognition, and interactive robot-concierges.

Cancellation policies – to counter cancellation rates often associated with the use of online travel agents (OTAs) and re-shopping tools, hotels are implementing tighter cancellation policies, such as 72-hour advance notice requirements. Travel buyers should look closely at including acceptable terms and conditions when negotiating with suppliers.

Revenue management – as room rates flatten and traditional revenue growth comes under pressure, hotels are becoming more creative in how they drive yields. They are using improved data and revenue management tools to optimise their revenues. In a dynamic pricing environment, buyers can work with suppliers and their TMC on a dynamic-based deal, with agreed discounts off the BAR (Best Available Rate).

Hotels have also been focused on driving direct bookings, so it is key to try and include benefits in corporate deals that will drive travellers to book via the preferred channels.