As hoteliers negotiate with their corporate clients for bookings in 2018, they’re finding they still have some room to push for rate increases.
Although these increases aren’t as high as the industry was able to command years ago, a number of factors are allowing hoteliers to raise rates from 2017 levels.
In his latest forecast, Bjorn Hanson, clinical professor at the Tisch Center for Hospitality and Tourism at the New York University School of Professional Studies, wrote high occupancy levels are helping hoteliers counterbalance the leverage their clients have through increasing supply and alternative accommodations.
“Following among the largest percent and dollar increases in corporate contract rates in decades of generally between 5.75% to 7% for 2016, 3% to 4% percent for 2017, the forecast for 2018 rates is for an increase of typically 2% to 3.5%,” he wrote.
Similar Environment
Travel buyers understand the hotel industry is experiencing high occupancy levels, and rates are going to go up as a result, said Cory Chambers, VP and chief revenue officer at Hospitality Ventures Management Group.
However, they also know there’s new rooms supply coming in, so they expect increases won’t be substantial and will be in line with inflation, he said.
Both 2017 and 2018 will show corporate rate increases flattening out a bit compared to previous years, Chambers said. Buyers are providing a little bit of pushback against stronger sales approaches, he said, so it’s incumbent upon hoteliers to make sure the buyers understand why bids are coming back the way they are.
Some corporate clients have expressed concerns over changes in cancellation policies, Chambers said. But it’s important to communicate to these clients that the policy changes have minimal to no effect on the company’s ability to negotiate deals.
“Most travelers have their plans locked in more than two days out and have the flexibility beyond two days to confirm their travel,” he said. “It’s been a hot topic of conversation in theory, but in practice, there’s been no material effect on the process.”
The negotiation process has been pretty much the same as previous years, said Lynn Prater, SVP of sales and marketing at McKibbon Hospitality. Negotiations have been ongoing all year, but this is the peak time for it, she said.
Travel managers and corporate clients have a responsibility to their companies, she said, and McKibbon has a responsibility to its hotel owners and investors. Both parties are trying to find a common ground that benefits them equally, she added.
