Delhi: The American Express 2008 Asia Pacific Corporate Hotel Rate Projections and Market Forecast, released in Sydney has reported 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. Travelling employees should be given the opportunity to provide inputs 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.''

Influences and Drivers highlights:

• Bangalore: occupancy rates stable at around 70 per cent, poor city infrastructure, supply to increase dramatically 
  
• Delhi: occupancy high and stable, averaging 80 per cent, significant new construction to reduce undersupply, access improved by low-cost carrier networks 
  
• Mumbai: Normal occupancy for Mumbai is 75-80 per cent, imminent new supply near commercial centre, major initiatives to develop city into international metropolis, top-tier occupancy declined sharply to 65 per cent 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, ranging 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 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, 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 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 Aggarwal.

HOTEL RATE PROJECTIONS IN OTHER MARKETS

Influences and Drivers highlights:

• Adelaide: occupancy rates averaging around 77 per cent, demand boosted by corporate and leisure sectors, limited increases to hotel supply in the short term 
  
• Brisbane: occupancy steady at around 80 per cent, demand driven by corporate sector and booming local economy, high construction costs constraining new supply 
  
• Melbourne: occupancy rising to 79.8 per cent, state government committed to developing tourism, to be 'events capital' of Australia, future supply increases 
  
• Perth: occupancy rising to 80 per cent, limited supply and robust demand growth leading to continued rate increases, additional travel stimulated by resources boom 
  
• Sydney: occupancy steady at around 80 per cent, demand is being driven by domestic corporate sector and strong local economy, limited increases to short term hotel supply

Influences and Drivers highlights:

• Jakarta: low occupancy, rising to 56-62 per cent; local governments committed to promoting tourism, supply levels to remain unchanged in short term 
  
• Kuala Lumpur: stable occupancy levels averaging 70-75 per cent, increased tourism arrivals in 2007, tourism a key foreign exchange earner 
  
• Manila: occupancy increasing to 74 per cent, demand fed by business process outsourcing industry, government focused on promoting the Philippines' natural beauty 
  
• Singapore: sustained high occupancy, averaging above 81 per cent, visitor arrivals to increase stimulating strong demand, casino and resort developments increasing supply 
  
• Bangkok: occupancy declining to 70 per cent, room rates steady, MICE industry boosted by new convention facilities

Influences and Drivers highlights:

• Beijing: occupancy moderating slightly to 70-75 per cent range, demand to remain strong, new hotel products dispersed across a broad area 
  
• Hong Kong: occupancy steady at 85 per cent, demand stimulated by travel from mainland China, stable market reflecting established position of city as Asian financial business and travel hub 
  
• Macau: occupancy fluctuating between 70 and 80 per cent, doubling of supply in next two years, huge increase in demand as city becomes Asia's 'Las Vegas' 
  
• Shanghai: occupancy moderating slightly to 68-75 per cent range, demand to remain strong, hotel products dispersed across a broad area, new brands act as pioneers for mainland market

Influences and Drivers highlights:

• High occupancy levels of 72-80 per cent moderating slightly, increased room rates as underlying demand strengthens, no new high-end supply in the short term

Influences and Drivers highlights:

• Auckland: occupancy high and stable at 75-80 per cent, supply to increase by around 10 per cent, city strategy focused on developing new demand generators 
  
• Wellington: low occupancy averaging 70 per cent, high room rates, market is susceptible to increases in supply

Influences and Drivers highlights:

• Occupancy slowly increasing from 70 per cent, increased supply may exert downward pressure on occupancy levels.

Forecast Methodology
The corporate negotiated rate movement projections, market drivers and market influences described in this document are derived from a collaborative project forged between American Express Consulting and Jones Lang LaSalle Hotels.
 
Corporate negotiated rate movement projections across 21 key Asia-Pacific cities were calculated using average corporate negotiated rate changes based on 2004–05, 2005–06 and 2006–07 data. This data was cross checked against general market trends and third party research.
 
Jones Lang LaSalle Hotels provided detailed insights on the factors which are driving and influencing rate movements across these 21 markets based on in-depth experience. Many of the target market tourism authorities were consulted. Trading performance data was generally sourced from sample baskets of hotels.
 
Key hotel trends were sourced by American Express Consulting based on experience and exposure to the industry. Additional information was gathered from partners in the hotel industry and from publicly available data.
 
American Express Consulting also invited Accor Hotels to provide a balanced hotel perspective of the key trends in this report.