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August 15, 2010
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Outlook positive, but mixed for hotels, says global survey




Research reveals positive trend despite broad geographical variations.

The international hotel industry has shown signs of recovery in the first half of 2010, according to the bi-annual hotel survey conducted bycorporate travel services company Hogg Robinson Group (HRG)

Although the survey reveals a fragmented global picture, the hotel market in Europe and the US appears to be stabilising, as rates are either flat or only marginally down.  In addition 12 of the 50 cities surveyed achieved a year-on-year rate increase when measured in pound sterling. In contrast, though, the Middle East region recorded the highest rate decrease, with double-digit falls in the United Arab Emirates, Bahrain, Qatar and Oman.

A number of trends were discovered by the research, including that:
• Many European cities saw average rate growth, such as Stockholm (13%), Zurich (7%) and Geneva (5%), and five of the top 10 most expensive cities worldwide were in Europe – Geneva, Paris, Zurich, Stockholm and Oslo.
• London has seen a 1% increase in average rate in the first six months of 2010, after a 4% decline in 2009, and maintains its position at 23rd in the rankings. The increase was driven by a significant increase in corporate occupancy levels and buoyant demand from the leisure sector. The snow and bad weather adversely affected the market in the early part of the year, but it rebounded in the second quarter.
• Moscow yet again retains its place as the city with the highest average room rate for the sixth year, despite a fall of 12% when measured in local currency. Geneva and Hong Kong were the second and third most expensive cities respectively.
• Abu Dhabi rates fell by 26% in sharp contrast to the 38% growth in average rate recorded in the first half of 2009.
• Rates in the US were flat or marginally back compared to 2009 figures, with the exception of San Francisco where average rates fell by 11%.
• The top end of the market continues to hold up well, with an average rate increase of 1% in five-star hotels
 
Improved performance
“Globally, the hotel industry has shown signs of recovery in the first half of 2010 when compared to the same period in 2009,” summarised Margaret Bowler, HRG’s director of global hotel relations.

 “A majority of the cities surveyed, although not yet in positive growth, certainly recorded an improvement in performance. It is good to see the positive effect of certain sectors travelling more regularly. However, it is clear that the rate of recovery is mixed and varies according to region, country and specific markets.

“The challenge now facing hoteliers,” she continued, ”is to increase rates in line with demand to pre-recession levels, something which many forecasters believe will not happen until 2012 at the earliest.

“Expectation is high for further recovery in rates and the big hotel groups are understandably working to return their rates to pre-recession levels. HRG has witnessed companies reviewing and consolidating their travel programmes to secure lower hotel rates through increasing their market share with a preferred hotel supplier. We continue to help corporates navigate a complicated market and ensure business travellers have the best hotel deal.”

Fragility remains
Douglas McWilliams, chief executive of the Centre for Economics and Business Research, a leading economic think tank, which analysed the HRG survey, pointed out that although a global economic recovery is taking place, the world’s economies remain in a fragile state. 

“Whilst the possibility of a double-dip recession is relatively small, the pace of the recovery varies significantly across the world,” he said. “The latest HRG Hotel Survey illustrates the effects of a multi-speed economic recovery in the hotel market. Many western economies are coming to terms with the budget cuts necessary to reduce sovereign debt levels which will inevitably soften room rate growth.

“Dynamic emerging economies have less need to take fiscal austerity measures in the current climate and we expect growth to be higher as a result. However, the survey shows that emerging economies have not, as of yet, fully recovered from the effects of the global economic downturn.

“In the UK,” he continued, “growth prospects are buoyed by a weak sterling, which continues to support tourism and leisure travel. In addition, the ongoing recovery of the banking and finance sector will contribute to corporate demand for rooms. There are, however, significant downside risks to growth in the market emerging from future cuts in public spending.”

HRG’s interim survey is based on a combination of industry intelligence, actual room nights booked and rates paid by its UK clients during January to June 2010 compared to the same period in 2009.


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