Report: 2022 Negotiated U.S. Hotel Rates Could Rise 15 Percent


Much like the 2021 hotel request-for-proposals cycle, this year’s negotiation season differs greatly from pre-pandemic ones. Many hotel companies have offered to roll over 2020 rates for a second year, and some buyers—though seemingly not as many as last year—are taking them up on it, with 2021 volume only nominally higher than 2020, and recovery still nascent.

Still, for those buyers conducting an RFP this year, the average 2022 U.S. corporate negotiated rate could increase 10 percent to 15 percent year over year, predicted industry expert Bjorn Hanson, adjunct professor at the New York University School of Professional Studies’ Jonathan M. Tisch Center of Hospitality, in his annual analysis. Reasons for the projected increase include restored hotel services, sellers more aggressively addressing financial challenges, and business and group demand recovery—mostly for small and midsize meetings of between 150 to 400 attendees.

Rate Strategies

Hanson said there are four primary approaches for rate negotiations this year: rolling over rates; applying a discount to a defined rate, typically the best available rate, which is dynamic pricing; using a hybrid model based on last year’s rate or a discount to the BAR, whichever is lower; and having fewer or almost no negotiated corporate rates and providing guidelines for travelers instead.

“There may be an RFP, but there won’t be, ‘We’ll guarantee 50,000 room nights in these three markets,’ ” Hanson told BTN. “It won’t be for normal volume. It will be more taking dynamic pricing or last year’s rates.”

Indeed, Hanson in the report estimates that 35 percent to 45 percent of buyers will maintain 2021 rates. He also projects 30 percent to 40 percent will discount to BAR while 10 percent to 15 percent go hybrid and 10 percent to 20 percent will have no negotiated rates.

“One thing to take away from my discussions is that buyers said they hate dynamic pricing and will avoid it because it sets them up for that becoming the model,” Hanson said, while adding those buyers also said they don’t have another immediate alternative. “They said, ‘As soon as I can stop dynamic pricing, I will.’ The risk is getting into a dynamic pricing model, and it being hard to get out of in the future.”

Buyer vs. Supplier Market

Though buyers should have had a negotiating advantage last year, most had dramatically less volume and more uncertainty and therefore less information with which to negotiate. Yet Hanson said some travel buyers didn’t get as many good deals as they could have—especially for a year in which he anticipated corporate rates could fall by up to 25 percent

“Some people who would be leading those negotiations and would be aggressive were furloughed,” he said. Also, “some buyers said, ‘We’ve been working with this hotel or intermediary for a long time. We’ll get a good deal, but we don’t need the best possible deal.’ “

He explained that some buyers believed that if they did not take a hard line in negotiations, then neither would hotels when their opportunity came. “They forgot that the first minute [hotels] can raise rates, they will,” Hanson said. “Some were very savvy buyers, but some were naïve.”

Still, some buyers did negotiate for every last dollar and cut their corporate rate by 40 percent to 50 percent, Hanson said. “They are not the ones who will get the opportunity to hold their rates over for another year,” he added. 

Negotiation Considerations

Hanson’s report notes a few factors buyers should keep in mind when negotiating for 2022. 

Much of 2021 occupancy has been concentrated around weekends, which has allowed hotels to shift to higher rate schedules for those limited periods. “But those limited periods represent large shares of accommodated demand.” Average daily rate for 2021 is about $25 less than for 2019, or almost 20 percent lower, according to the report. 

Further, for some hotels, corporate and group rates in 2021 are lower than leisure rates. With fewer corporate and group rates, overall ADRs have increased because of the mix of demand rather than real increases in room rates.

“When these factors are not fully understood or disclosed, buyers may be using data that lead to misunderstandings about the rate environment, and therefore agreeing to higher negotiated rates,” according to the report.

Cancellation policies also are a key factor this year. “Word is getting around that you can negotiate more flexibility,” Hanson said. But he added that hotels also are starting to enforce cancellation policies again after allowing more leeway during the pandemic. 

An emerging negotiation factor noted in the report is disclosure of and/or commitments for hotel, hotel brand or corporate environmental, social and governance practices. “These can include third-party generated or confirmed environmental reporting, board of director composition, compensation reporting and other matters.”

Despite the reduced number of RFPs during the pandemic, Hanson still believes there is value in having a negotiated corporate hotel program. “Buyers have a long list of priorities,” he said. “There’s the quality of the traveler’s experience, price, long-term relationships, locations [and more]. … I think both the buyer and seller sides see great value in negotiated rate agreements. … I’ve heard some people say that this is the end of negotiated rates, or by 2025 this won’t exist anymore. I think there will be a return to a more traditional model with some variations with what has been learned these past two years.”

RELATED: 2021 rate negotiation forecast



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Delta’s Domestic Corp. Travel Recovery Nears 50 Percent Mark


Delta Air Lines’ corporate travel volume in recent weeks has grown to its highest point during the Covid-19 pandemic recovery, with domestic business travel volume last week nearing 50 percent of pre-pandemic levels, CEO Ed Bastian said Wednesday in Delta’s third-quarter earnings call.

For the overall third quarter, domestic corporate travel volumes were about 40 percent recovered, which is 10 percentage points higher than their recovery rate in the second quarter, Bastian said. While corporate travel recovery “paused” in August and early September while Covid-19 case counts grew with the spread of the delta variant, spurring many companies to delay return-to-office plans, demand since Labor Day once again has picked up, he said.

Delta’s most recent survey of its corporate customers indicated that 90 percent expect their travel volumes in the fourth quarter to be equal to or higher than third-quarter levels, according to Bastian. About 60 percent of Delta’s corporate customers said they have reopened their offices, and an additional 10 percent said they would do so before the end of 2021.

“We anticipate meaningful acceleration in business travel starting at that point,” Bastian said. “We hear regularly from our corporate customers that they’re ready to get back to travel, see their clients face-to-face, renew business relationships and develop new ones.”

Business travel volumes from unmanaged programs are running five to 10 percentage points ahead of managed programs, with “smaller, hungrier companies out there hitting the road sooner than some of the bigger multinationals,” Delta president Glen Hauenstein said.

International business travel also is showing signs of recovery, he said. In the second and third quarter, corporate travel to Europe was running at about 15 percent of pre-pandemic levels, but that has improved to 30 percent in recent weeks with the news that the U.S. will open to vaccinated foreign visitors next month. Long-haul travel to South America, previously “pretty much nonexistent,” also has started to recover, and the Pacific region could be next in line, according to Hauenstein.

“We are expecting those to improve significantly … as the vaccination rates in important places for us like Korea and Japan are now approaching between 70 percent and 80 percent,” he said. “Hopefully, we get some good news out of that region of the world starting in the next few months.”

Domestic leisure travel, meanwhile, has made a “full return” to 2019 levels, Bastian said. Delta’s passenger revenue for the third quarter was $7.2 billion, 37 percent of 2019 levels, and total third-quarter operating revenue was 27 percent of 2019 levels, boosted by a 39 percent increase in cargo revenue compared with 2019.

Delta executives noted that premium travel revenues have been strong even with the lower rates of business travel and indicated that Delta would look to increase premium seating capacity in the future.

“We’re selling [premium seats] 10 points higher than we did pre-pandemic,” Bastian said. “We always ran relatively full in terms of load factor, but a lot of those are complimentary upgrades, and we’re seeing people are willing to pay us for those seats. That’s why we want to create more over time.”

Delta reported net income of $1.2 billion for the third quarter, which included the benefits from federal aid due to the pandemic. Excluding that and other special items, Delta still reported net income of $194 million for the quarter, its first such profitable quarter since the pandemic began.

Bastian said he expected the carrier would see a “modest loss” in the fourth quarter due to rising fuel prices.

RELATED: Delta Q2 earnings



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At First Deadline, Less Than 1 Percent of United U.S. Employees Unvaccinated


After passing the deadline for its Covid-19 vaccine mandate, more than 99 percent of United Airlines’ U.S.-based employees have been vaccinated, according to a memo from CEO Scott Kirby and president Brett Hart to United employees.

United announced its vaccine mandate in August with the Sept. 27 deadline later determined by the U.S. Food and Drug Administration’s full approval of the Pfizer-BioNTech Covid-19 vaccine. Last week, the carrier reported more than 97 percent of its U.S.-based employees were vaccinated.

“We know for some, that decision [to get vaccinated] was a reluctant one,” Kirby and Hart said in the memo. “But there’s no doubt in our minds that some of you will have avoided a future hospital stay, or even death, because you got vaccinated.”

The Sept. 27 deadline was for employees to get and upload records of their first dose of a vaccine. Employees have until Oct. 31 to be fully vaccinated.

United also is beginning the process of terminating the less than 1 percent of employees who opted not to get vaccinated, according to Kirby and Hart.



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United: 97 Percent of U.S. Employees are Vaccinated


More than 97 percent of United Airlines’ U.S. employees are vaccinated against Covid-19 as the carrier’s deadline for its vaccine mandate nears, the airline reported in a memo to employees this morning.

Per the mandate announced in August, United’s U.S. employees have until Sept. 27 to upload records that they have at least received their first dose of one of the approved vaccines. United said it would start the “separation process” with employees who had not received and reported their vaccination nor had been granted an extension as soon as the following day. Employees have until Oct. 31 to be fully vaccinated.

United’s mandate came before U.S. President Joe Biden announced executive orders that included asking the U.S. Department of Labor to develop a requirement for vaccines or weekly testing at any business with more than 100 employees. The 97 percent vaccination rate does not include the “small number” of employees who are seeking an exemption, according to United.



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Hilton: Business Travel Room Nights Could Reach 70 Percent of 2019 Levels by Q4 2021


Hilton Worldwide president and CEO Christopher Nassetta is
optimistic about the future of travel and for Hilton. He’s basing this optimism
on having chaired and attended the World Travel and Tourism Council’s global
summit in Mexico, where more than 800 participants attended in person, as well
as on data that supports the view that the slope of the recovery has steepened
since the company released its fourth-quarter 2020 results. 

“It was great to be in the same room with other
hospitality and government leaders talking about the bright future that lies
ahead for our industry,” Nassetta said during a Wednesday first-quarter
earnings call. “The event made me even more optimistic for our recovery
and confident that we are beginning to see a new era of travel emerge.”

There’s no arguing that leisure travel will continue to lead
the recovery, and based on current trends and forecasting, Nassetta thinks
leisure room nights could be at 2019 levels by the fourth quarter—in the first
quarter leisure room nights already were close to 90 percent of 2019 levels,
and April bookings for the summer exceeded 2019 peak levels by nearly 10
percent. But he also believes business transient room nights could be at about
70 percent from two years ago by that time, and group volume at about the 50
percent mark. 

“That’s how we think the year is going to play
out,” he said, adding that revenue per available room levels are poised to
improve each month. “I think we could be back somewhere around 70 percent
[of RevPAR] of 2019 levels on a run rate basis, which isn’t all the way home,
but is a heck of a lot better than where we were.”

Average daily rates, though, are not expected to be near
2019 levels for some time yet, as the higher priced corporate business will be
slower to return, and there needs to be more compression from groups. “To
get both room nights and rate and the compression we need… the bigger groups to
be back,” he said. “So I still say 2023, 2024, but I’d probably err
toward the earlier end of that.”

Still, Hilton is seeing a slow shift back to a more normal
mix of business with corporate group leads up more than 70 percent for future
periods, Nassetta said. “Associations and trade shows have also started
opening up housing and registration sites for events later this year. As we
look out to next year, our group position is roughly 85 percent of peak 2019
levels with rate increases versus 2019.”

China as a Case Study

Occupancy levels in China are currently running in the low
70s, and Hilton expects this momentum to continue. “RevPAR in China
increased 64 percent year over year for the first quarter, with occupancy
levels increasing from about 35 percent to 65 percent during the quarter,”
said Hilton CFO Kevin Jacobs. “Both leisure and business transient demand
rebounded quickly as restrictions eased, with March occupancy in China
exceeding 2019 levels.”

Based on what the company has seen in China and in pockets
of the U.S. once restrictions are lifted and offices reopen, “business
travel returns,” Nassetta said, adding that in the U.S. states with lifted
restrictions, “business travel volumes are already 75 percent of what they
were in 2019 in those markets. It is really good evidence that as people get
back to work, as kids in the fall go back to school, it is very likely you are
going to see a step change into the third and fourth quarter in business
transient.”

Q1 Earnings Metrics

First-quarter, system-wide RevPAR decreased 38.4 percent
year over year to $46.23 on a comparable and currency neutral basis, and 53
percent versus the first quarter of 2019. Rising Covid cases and tightening
travel restrictions weighed on demand through January and most of February, Nassetta
said, but March marked a turning point, as it overlapped with the pandemic from
last year, and RevPAR for the month was up 23 percent year over year.

System-wide occupancy reached 43.9 percent for the quarter,
a change of negative 11 percentage points year over year. ADR was $105.38, a 23
percent year-over-year decline. 

For the period ended March 31, U.S. RevPAR was down 36.6
percent year over year to $51.10. Occupancy reached 47.7 percent, a 9.9
percentage point drop from 2020, while ADR was $107.23, representing a 23.4
percent decline.

Asia-Pacific reported the best returns. Occupancy was up 6.5
percentage points year over year to 43.7 percent. RevPAR was $42.65, down just
6.6 percent from 2020, and ADR was $97.60, a decline of 20.5 percent.

The company added 105 hotels with more than 16,500 rooms to
its system during the quarter, for net unit growth of 5.8 percent year over
year. Hilton also singed nearly 21,900 rooms, which was slightly ahead of
expectations, Nassetta said. As of March 31, the company pipeline included
about 399,000 rooms under construction or approved for development. Hilton expects
net unit growth of about 4.5 percent to 5 percent for 2021.

Despite Nassetta’s optimism for the future, Hilton’s first-quarter revenues were $874 million, down from $1.92 billion in 2020, and the company realized a net income loss of $109 million

RELATED: Hilton
Q4 2020 earnings



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AHLA: 2021 U.S. Hotel Jobs Expected to Be Down 20 Percent from 2019 Levels


In a new report released today by the American Hotel &
Lodging Association, the U.S. hotel industry is expected to reach 1,863,026 jobs
in 2021, which represents a more than 20 percent loss compared with the number
of total hotel jobs in 2019, which were 2,341,271. These numbers are direct
hotel property jobs and do not include job losses from other industries
supported by the hotel industry, according to the report, which was sourced by
Oxford Economics.

The report lists job totals for each of the 50 U.S. states
plus Washington, D.C., for 2019, 2020 and 2021. The top five states with the
most expected job losses compared with 2019 totals are, in order, California,
Florida, New York, Nevada and Hawaii. These five states account for about 8
percent of the total expected losses compared with 2019 totals. Demonstrating
the extent of the job losses in California, the state’s projected decrease of
67,169 jobs represents more than 27,600 more lost jobs compared with No. 2
Florida’s expected decrease of 39,560 jobs. 


While many other hard-hit industries have received targeted federal relief, the hotel industry has not.”

AHLA’s Roger Dow


The report comes less than a week after U.S. Sen. Brian
Schatz (D-Hawaii) and U.S. Rep. Charlie Crist (D-Fla.) introduced the Save
Hotel Jobs Act
to the U.S. Congress. The bill calls for targeted federal
relief to the hotel industry workforce, including up to three months of full
payroll support, according to AHLA. AHLA and the hospitality union Unite Here joined
forces to support the bill.

“While many other hard-hit industries have received
targeted federal relief, the hotel industry has not,” said AHLA president
and CEO Chip Rogers in a statement. “We need Congress to pass the Save
Hotel Jobs Act to help hotels retain and rehire employees until travel demand,
especially business travel, begins to come back.”

RELATED: Hotel
Industry Pushes New U.S. Legislation for Payroll Grants



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Study Finds 90 Percent of Global Travellers are Ok With Health Passports


There’s been a lot of debate about the ethics of introducing digital health passports and vaccine passports which will store your health information related to COVID-19 such as vaccination records and test results.  

 

A recent study commissioned by travel tech giant Amadeus and delivered by Censuswide has found that nine out of ten travellers would be comfortable using digital health passports to help restart travel.

 

The international study included over 1,000 respondents from India.

 

The online survey questioned 9,055 travellers in France, Spain, Germany, India, United Arab Emirates, Russia, Singapore, UK, and the US. It included people who said they have travelled abroad in the last 18 months.

 

 

However, 93 percent of the people surveyed also said they had “some concerns” about how their health data might be stored, and that their personal information may fall into the wrong hands.

 

Of those surveyed, 62 percent said they would be more likely to use an app to store their health data if a travel company partnered with a trusted healthcare company to create the app.

 

Most countries are unsure about vaccine passports. Several European countries may hand out certificates to the vaccinated with a barcode that officials at airports could scan to verify vaccinations.

 



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STR: March U.S. Hotel Occupancy Tops 50 Percent


U.S. hotel occupancy and revenue per available room in March were the highest reported for any month since February 2020, and the March 2021 average daily rate was the highest since March 2020, according to STR. 

Occupancy reached 54.6 percent for March, ADR was $106.08, and RevPAR was $57.87, according to STR. Instead of showing the year-over-year change, STR provided comparisons to 2019 data because of the Covid-19 pandemic’s effect on March 2020 data. Compared with March 2019, March 2021 occupancy was down 20 percent, ADR was off by 19.7 percent, and RevPAR declined 35.8 percent.

Among the top 25 markets, 13 reported occupancy above 50 percent last month, compared with just five for February. Tampa led at 77.1 percent, followed by Miami at 72.7 percent and Phoenix at 70.8 percent. Markets with occupancies below 40 percent were Boston at 35.7 percent, Minneapolis at 36.1 percent, Washington, D.C. at 38.7 percent and Chicago at 39.9 percent.

RELATED: STR: U.S. Hotels in February Show Monthly Improvement



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Business Travel Projected to Return to 70 Percent of Pre-Covid Levels By Year End


AUSTIN, Texas–()–GoldSpring Consulting, the leader in business travel and meetings consulting, released today benchmark statistics from the firm’s Business Traveler Sentiment Survey, revealing key insights on return to travel comfort levels from thousands of employees worldwide. Notably, 63 percent of business travelers desire to travel within six months at time surveyed, or by October 1, putting the industry on track for 70 percent of travelers saying yes to travel by the end of the year. Also compelling, six percent of business travelers opt for travel within the next 30 days, by May 1.

The survey is provided by GoldSpring Consulting as a complimentary service and launched globally each month to employees via participating corporations. Results gauge company-specific traveler sentiment on timing of first post-Covid business trips, willingness to fly, lodging preferences, large meeting attendance, vaccination requirements, return to office timing, and more.

The Business Traveler Sentiment Survey is unique because it focuses specifically on business travelers,” said Will Tate, partner, GoldSpring Consulting. “It supports corporations by enabling informed decision making as pressure mounts to get employees back on the road. It helps them implement effective corporate policy and set expectations for their preferred airlines, hotels and other travel suppliers.”

With a 30 percent response rate, the survey is striking a chord with business travelers. More than fifteen thousand travelers from global corporations were surveyed with more than five thousand responses across 60 countries. Participation is growing every day, and while the full report is reserved for participating corporations, here are benchmark highlights:

  • Great Britain is the country most eager to return to travel with 24 percent of business travelers wanting to travel within a month. France comes in second at 17 percent.
  • 89 percent of business travelers choose traditional hotel stays over shared lodging, expressing confidence in hotel protocols.
  • 39 percent of business travelers say vaccination is a priority before traveling, with 19 percent opting for travel supplier screenings and temperature checks.
  • 74 percent of business travelers now consider driving vs. flying or rail for certain trips, a surprising shift since pre-Covid business travel days.
  • 44 percent, the highest percentage of respondents, see themselves attending their first large meeting (more than 25 people) in 90 days to six months, sometime between July 1 and October 1.
  • 26 percent of business travelers see themselves returning to the office within 30 days, around May 1.

“While the results are optimistic for business travel to return significantly by the end of year, it will be necessary for companies to check in routinely with travelers,” Tate said. “Companies can join the survey now and also redeploy it over time to gauge change in sentiment as travel ramps up in the coming months.”

Corporations wishing to participate in the secure and complimentary survey can go to GoldSpring Business Traveler Sentiment Survey to sign up and receive their survey link.

About GoldSpring Consulting

GoldSpring Consulting is the leader in business travel and meetings consulting, dedicated to helping buyers succeed with services to support all aspects of corporate managed travel and meetings programs. GoldSpring’s industry-leading team of experts offers extensive experience and custom solutions, including innovative benchmarking and sourcing technology to help clients fully optimize their corporate travel programs. For more information visit www.goldspringconsulting.com.



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Survey Says 40 Percent of People Would Trade Sex for Travel


Well, if anything speaks to Americans’ desire to travel again, this does.

Emphasis on ‘desire.’

ADVERTISING

According to a new survey, 38 percent of the respondents say they would give up sex for a year if they could go on a trip immediately.

Trending Now

Travel technology, man with airplane and laptop

The survey, commissioned by the online hotel booking platform Trivago, found that 81 percent of Americans said that not being able to travel has been one of the worst parts of the coronavirus pandemic.

The survey polled more than 2,000 adults in the U.S. and U.K., just about equally split between the two nations. Trivago said in a statement that the survey was conducted to “see how consumers are planning, dreaming and considering travel in 2021.”

Well, they sure found a good comparison point.

In addition to the option of giving up carnal relations for a year to travel now, 25 percent said they would give up all their savings to go on a trip immediately, and 48 percent said they would give up their job.

Some respondents were even willing to give up some relationships to travel immediately, with 20 percent saying they would give up their significant other.

Um, no word on the breakdown between male responses and female on that one.

“It’s clear that travel plays a massive role in our lives and overall happiness,” Trivago said.

Also in the survey, 56 percent said they feel “excited” when they think about their first trip after the pandemic, with nearly three-quarters of respondents saying their first trip will be to see family and loved ones they have not seen in a while.





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