Cost of business travel to rise

The cost of business travel from the UK is likely to rise this year, a leading travel management company has warned.

The prediction came from Hogg Robinson Group with the release of its 2007 Hotel Survey.

HRG global hotel relations director Margaret Bowler said: “The benefit felt by the strong British pound, which has substantially benefited UK corporates throughout 2007, is unlikely to continue to such an extent throughout 2008.

“As a result, business travel may become more expensive for UK corporates.

“Concerns over a global recession may continue to preoccupy many industries, however it is clear that the interconnectivity of world markets makes corporate travel a necessity which businesses cannot ignore and we anticipate some growth in 2008.”

Bowler added: “We anticipate 2008 will be a year of further growth for the global hotel industry, although some markets may experience a temporary slowdown in the growth of average room rates.

“However, suppliers are expected to maintain average rates as supply and demand balance out; hotels are indicating that even if occupancy levels dip slightly in the short-term, they are looking to protect average room rates through aggressive yield management.”

The strength of the pound benefited UK corporates when travelling to certain overseas countries last year, helping to cushion the impact of significant local currency room rate rises. For example, a 24% local currency rate rise in Johannesburg equated to a more affordable 10% when converted to GBP, the report said.

Moscow emerged as the most expensive destination worldwide for the third consecutive year, according to the survey.

The Russian capital posted a “staggering” 93% rise in average hotel rates since 2004. The average rate in 2007 was almost £250 – an 11% rise year-on-year – compared with London in tenth place at £154.

New York City hotels were the second most expensive for business travellers at £192 followed by Paris (£171), Dubai (£164), Milan (£164), Stockholm (£160), Mumbai (£160), Bangalore (£159), Hong Kong (£154) and then London.

UK hotels were a “consistent performer” last year with most cities showing a steady growth. This trend was seen in all international markets outside the US.

The US reported mixed results, in part due to weak dollar exchange rate and economic concerns, particularly in the last quarter. New York retained its position as the second most expensive city worldwide.

India continued to show “exceptional growth potential” with the financial capital Mumbai achieving a 37% average room rate increase – the highest of any city surveyed.

Only five of the 50 cities surveyed recorded a decline in rates in 2007, largely attributable to maturing local markets or a significant increase in room capacity and availability. Rates in Bangalore and Philadelphia dropped by 5%, Tokyo and Bristol were down 2% and Liverpool fell by just 1%.

Some companies are adding serviced apartments to their accommodation mix as an option for long stays with the average length of stay standing at 7.25 nights.

The role of the international corporate services provider becomes ever-more valuable as companies look to maximise their return on expenditure and control costs during times of economic uncertainty, the report said.

“The hotel industry has shown a strong performance throughout 2007 – although not to the levels of 2006 with many key cities achieving single as opposed to double digit growth,” said Bowler.

by Phil Davies