Demand for hotel rooms will continue to outstrip supply

Demand for hotel rooms will continue to outstrip supply, says American Express Consulting Bangalore shows maximum room increase in APAC region.

The American Express 2008 Asia Pacific Corporate Hotel Rate Projections and Market Forecast released in Sydney today reports that demand for hotel rooms will continue to outstrip supply forcing up the
corporate negotiated rates in all major cities around the region.

In addition to the rate projections, the analysis by American Express Consulting, a division within Global Commercial Card, highlights the emergence of several new trends that will impact on a corporation's
ability to manage its hotel spend.

Firstly, a new generation of travellers are stimulating the supply of new types of rooms and new styles of hotels. Secondly, corporate social
responsibility policies are starting to influence buying decisions, and finally the movement of hotel pricing practices from static to dynamic models.

"Travel Managers and Procurement professionals will continue to face many challenges when managing hotel expenses, however there are steps companies can take to enhance their negotiating position," said Prashant
Aggarwal, head of American Express Consulting, Japan, Asia Pacific and Australia.

"When preparing for negotiations with hotels, companies must collate as much information as possible to ensure discussions are based on fact.

 

They should consider implementing a corporate card program to
get access to transactional level data which can be overlaid with data from the travel management  company, the hotel and general ledger," said Aggarwal.

"Travelling employees should be given the opportunity to provide input before a travel policy and preferred hotel supplier list is finalised. Finally, a
corporate travel policy must be clear and succinct and well communicated by senior management.

 

Ensuring clear understanding of the policy should result in  fewer
instances of non-compliance," added Aggarwal.

India - 2008 Hotel Rate Projections

-Influences and Drivers highlights:

Bangalore: occupancy rates stable at around 70%, poor city infrastructure, supply to increase dramatically

 

Delhi: occupancy high and stable, averaging 80%, significant new construction to reduce  undersupply, access improved by low-cost carrier networks.

Mumbai: Normal occupancy for Mumbai is 75-80%, imminent new supply near commercial centre, major initiatives to develop city into international
metropolis, top-tier occupancy declined sharply to 65% following the bombing in July 2006, this is expected to be short lived.

Other 2008 Trends to Watch

Managing New Demand – the 'New Room' Traveller demands are increasing and include the full spectrum of modern technologies and lifestyle options from wireless internet access to health services.

This has introduced a wider range of innovative accommodation styles including:

Cabin style: approximately 10 square metre cabins with convertible sofa beds and free internet access.

Express style: lodging only at a highly competitive rate

Boutique guest houses: intimate accommodation with personalised services and facilities.

Serviced apartments: designed for short term stays with home-like amenities

 

Company guest houses: furnished apartments and town houses set up for extended stays "It is important companies remain open to the new opportunities presented as the travel landscape continues to change," said Mr Aggarwal.

 

"We would recommend reviewing the factors that enable  travelling
employees to conduct business most effectively and then review the preferred list of hotels to ensure their services align with these needs."

Managing Non-Product – Corporate Social Responsibility

Customers are increasingly considering a supplier's corporate social responsibility practices and hotels are responding positively to this.

 

Philanthropic initiatives such as financial contributions to community programs and local purchasing policies are becoming more popular. In addition environmental programs such as recycling and waste reduction
and using pollution free fuel are being adopted by many hotel chains.

"The trend to include CSR questions into the request for proposals is definitely increasing and hotels that accommodate this are going to end up winning  favour," said Mr Aggarwal.

 

"From a customer's perspective, if a company maintains good CSR standards then it is  in its best interest to partner with suppliers who do so
as well."

Managing Inventory – Dynamic New Pricing

Hotels are increasingly introducing dynamic pricing models because it increases their competitiveness and flexibility and allows them to increase occupancy without sacrificing their rate integrity. The price is determined according to forecast demand, market intelligence and available room supply.

 

Evidence from American Express' corporate clients indicates
they remain reluctant to move away from fixed or static pricing because of the challenges presented by dynamic pricing which include:

Measurement: historical data is required so room rates can be matched against the figure a client would have paid using the static model
Budgeting: a buyer should measure historical booking patterns and source intelligence that details market conditions in order to budget based on calculated assumptions.

"While it does present challenges, dynamic pricing also offers certain advantages to buyers including greater access to rooms and potential savings as the hotel responds to peaks and troughs.

 

It should be explored based on a company's individual needs to
determine whether it could work in its financial favour. The key to success is having robust historical data and expert intelligence on anticipated
market conditions," concluded Mr Aggarwal.