Tracking mostly positive economic growth indices domestically and globally in recent years, and due to several important industry factors as well, hotel rates should continue to rise for the remainder of 2014 and beyond, according to hotel management industry leader Kerry Ranson, President of Expotel Hospitality Services Inc.
and chair-elect of IHG Owners Association.
Ranson said generally strong economic factors, coupled with all time high demands and mostly static new inventory numbers, will combine to energize a continued, steady rise in hotel rates throughout the second half of 2014 and 2015.
A key rate driver, Ranson added, is a resurgent group business segment, as increased numbers of companies are holding meetings and trainings and positioning resources for growth.
“Let’s call it – corporate earnings are at all-time highs, and companies are responding by deploying capital to grow their business models,” Ranson said. “Thus, as the business division of room nights keeps going up, so will our rates along with them. At Expotel, we’ve been living heavily on transient increases, but now we’re seeing more and more of our group business showing significant demand increases.”
Latest industry surveys show hotel rates increased in 2013 for the fourth straight year in both domestic and international markets. Expotel’s portfolio ADR is up 6.5% to budget and 8% to previous year, Ranson said. “In this business environment, knowing and servicing our markets intimately has allowed us to maximize rate opportunities at the right time, right day and right room types.”
What about the effect of OTA’s? While the result of OTAs has slowed hotel growth rate opportunities compared to previous cycles, the “lowest rate guarantee” that IHG and other brands offer now are helping “level” OTA impact on rates, Ranson believes. “Now, consumers are confident that booking at brand direct sites will yield the best deals.”
What could change the picture? Ranson said he always plans for the “unexpected.”
“God forbid, we face the consequences of another high profile terrorist attack, or we have to hunker down with another high debt issuance from Europe or the US. Those are the kinds of perils that could cut the legs from beneath the current trend in our industry.
“Meantime, as long as companies continue producing more goods and hiring more people, they will be looking to align their business travel choices with brands that they trust to deliver a consistent experience for their employees.”