Many predicted business travelers would cut back on the number of trips they take, opting for longer stays instead. That prophecy's come true, with five-star hotels benefiting most from their higher rates.
Despite being half-empty, Europe’s hotels are charging more than they were before the pandemic.
On average, room rates are $31 more expensive, according to auditing and booking platform Tripbam, which has compared corporate booking data from February 2021 to the same month in 2019, when the average rate was $216. This is despite volumes remaining depressed at about 50 percent down on comparable 2019 levels, for Europe, the Middle East and Africa.
“Bearing in mind we’re at about 50 percent volumes, the fact the hotels are managing to hold up such a rate is quite phenomenal,” said Peter Gover, Tripbam’s European managing director, during a webinar that also looked at data across Asia Pacific. That region recorded a 60 percent drop on 2019 levels, and rates $51 per night lower.
Tripbam’s data also pointed towards “significant growth in market rates and booked rates across five-star properties” which was helping to nudge the prices above pre-pandemic levels.
The recovery of corporate travel was behind this new push, according to one hotel executive.
“We’re seeing a trend of people booking higher room categories. At first we suspected it was due to the closure of restaurants and bars, we thought everybody would want a better in-room dining experience. However, even with reopening, that trend has continued,” said Lauren Reay, account director, managed partnerships, at PPHE Hotel Group.
“From our discussion with corporate clients, there seems to be a reduction in the number of trips, but it’s been replaced with longer trips. People are justifying the better room category,” she added during the webinar.
Meanwhile, global rates charged by hotels publicly were just $11 per night lower than the same month in 2019.
The recovery comes as a new Bank of America report said airlines were seeing their corporate travel bookings improve. In the U.S., domestic volumes improved to -9.9 percent versus 2019, and against -16.7 percent in the prior week. Pricing was down 6.8 percent compared to 2019, and down 10.4 percent on the week before.
“With leisure demand nearly back to pre-pandemic levels, there was more of an inflection in corporate travel as both corporate bookings through large channels and smaller channels improved to -35.9 percent and -4.4 percent versus 2019, respectively,” it said. “Our corporate bookings data continues to pick up as employees return to offices and Kastle office occupancy improved slightly to 38 percent (versus 37 percent last week and 23 percent at the start of the year).”
Hotel rates are also recovering faster than occupancy due to staffing costs. “As a business, we foresee ongoing pressure on energy pricing, supply chain, which will likely drive further rate increases,” Reay said. When asked how the group could still maintain rates and service levels, she replied there would be a focus on contactless services to improve the customer journey — technology that was developed during the pandemic.
“Every hotelier I talk to in London can’t find staff to clean, or for front of office, and they would open more floors if they could,” Gover added. “I think we’re all surprised by how quickly the rates have come back to the levels they were, and with such a low travel volume.”
In November last year, the Global Business Travel Association predicted hotel rates would rise 13 percent. Gover added that an economist would suggest that if volumes were to return to 80 percent, average rates might drop because of better efficiencies. “(But) I’m not sure a normal macro-economic environment will occur for quite a while yet,” he said.
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Photo credit: There has been significant growth in market rates and booked rates across five-star properties. Adam Winger / Unsplash