In the heat of summer, the last thing you probably want to think about is setting your hotel program goals for 2018, but hotel RFP season is right around the corner, usually running from August to October. This is when most hotels request a bid package from companies to evaluate their hotel spend and make a pricing decision for their negotiated rate.
Travel managers and TMCs alike must be prepared by understanding industry benchmarks. After all, the last thing anyone wants is to be on the losing side of one of these negotiations…
What’s the good news?
We’ve taken out the guesswork, so you can spend more time catching rays, and less time pouring over data to determine trends in room rates, demand, occupancy, and supply.
Recently, we hosted a webinar with none other than Isaac Collazo, IHG’s Vice President of Performance Strategy & Planning. In his role, he analyzes macro-level global and regional IHG brand performance, evaluates current economic trends and forecasts, and develops industry forecasts that drive the IHG annual budgeting process.
Also on the call was Kelly Wagner from World Travel, Inc. Kelly has been in the travel industry for over 20 years, and she currently heads up our Consulting Services Department, where she and her team handle air, car, hotel, and ground transportation negotiations for our clients.
This informative webinar explored all the biggest trends, as well as what they could mean for the hotel and travel industry moving forward.
Watch the Webinar:
To view a recording the recent webinar, “An Insider’s View on Hotel Trends,” click here.
So, what are the current trends, and what do they tell you about possible pricing this year? Here’s an overview of Isaac’s presentation…
Global and U.S. lodging demand remains at a record high.
2017 room demand is higher than what had been expected. The YTD growth rate is at a six-year high. After nearly a year of flat gains, Group demand also has seen better growth in 2017.
Travel is becoming less of a luxury and more of a birthright.
Occupancy = Rooms Sold / Rooms Available
Global occupancy is at a record high for both May YTD and the 12-month moving average.
U.S. occupancy set annual records in both 2015 and 2016. The same outcome is expected for 2017. In the U.S., the lower occupancy levels of the lower tier segments are due mainly to its older age and limited new brand development.
While still below the long-term average, supply is on the increase and is at a seven-year high globally. Nearly half of a million rooms have opened in the industry during the past two years with most in the upper tier segments.
71% of the U.S. supply additions in the past two years have been in the Upscale and Upper Midscale segments.
ADR (Average Daily Rate) = Room Revenue / Rooms Sold
Despite record-breaking demand and occupancy, average rate growth continued to trend downward globally. Transient demand has driven the weakness in the industry’s ADR growth.
Average rate is generally well above $100 in most global markets. In the U.S., average rate was also above $100 with a fair number of markets above $150.
Understanding ADR growth levels and the outlook for 2018 will give you a solid knowledge base for negotiations. Better yet, you’ll know if a hotel is trying to charge you more than the industry standard.
Given all these trends and benchmarks, what does the forecast look like for 2018? Plus, how will events like Brexit or the Marriot merger impact the industry?
Watch the webinar to find out! To view the recording, click here.
World Travel, Inc. is committed to answering any questions you have regarding hotel negotiations. Feel free to contact your account manager directly or simply submit your question as a comment below.
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This post was written by Tiffany Zerby