Global distribution system hotel bookings remain steady
Tuesday, February 5, 2013
Although the economy has shown signs of moderate improvement in recent months, many companies are still hesitant to commit to increasing spending on business travel. Despite the fact that hotel rates are rising around the world, the number of reservations made through global distribution systems (GDSs) struggled to make gains in December.
An uncertain market
According to data from Pegasus Solutions, bookings made by corporate travel managers using GDSs remained stagnant in December, compared to the previous year. Although this is likely to be a concern to GDS service providers, the news was relatively positive, as December was one of only three months in which bookings made through GDSs did not lose ground in 2012. This could indicate ongoing hesitation to increase business travel spending at many organizations, especially in light of increasing average nightly rates for corporate suites at chain hotels.
Additional analysis by Pegasus suggests that demand for corporate travel services in the hospitality sector could increase during the coming months, but that growth has already been significantly slower than initially anticipated. Advanced reservation data indicates sustained demand during the first month of 2013, but that prolonged economic uncertainty makes it challenging to accurately predict growth in the business travel sector.
"Businesses are still determining the impact of potential political and policy changes, and are acting cautiously," reads a summary in the report. "The good news is that they are beginning to act, unleashing pent-up business travel demand from hesitant periods in 2012 so companies can reengage to capture market share. The volume exists, but it is growth against prior year that will not be pronounced during the first part of 2013."
Increased demand for cost-effective accommodations solutions could play a significant role in the potential growth of alternatives to chain hotels, such as serviced apartments and corporate housing. While many organizations are cautiously increasing their business travel budgets as the economy begins to stabilize, the need to save money will be a primary factor for the rest of the year. This, in turn, could spur some companies to seek alternatives to the often costly corporate suites at chain hotels.
A resourceful approach
Although executives at large companies have the support and resources of travel management professionals to back them up, proprietors of smaller businesses often do not have this luxury. As such, the need for cost-effective accommodations becomes even greater for the latter demographic. In response to rising hotel fees, some entrepreneurs and small business owners are adopting a more creative approach to business travel.
USA Today reports that many corporate travelers are investing in rental apartments as an alternative to the high rates of chain hotels. Gianfranco Garibaldo, owner of a real estate business in Monaco, travels to New York on business several times throughout the year. In the past, Garibaldo used to stay at a well-known hotel in Manhattan, where rates could exceed $500 per night. To save money, Garibaldo decided to invest in an apartment in the city, a decision that ultimately saved him money.
"It's absolutely to me non-economical to go to a hotel in Manhattan because they are so expensive," Garibaldo told the news source.
In addition to providing travelers with a more cost-effective alternative to costly corporate suites at chain hotels, renting furnished apartments is becoming a lucrative growth market in the U.S. real estate sector. Chekitan Dev, an associate professor at Cornell University's School of Hotel Administration, told the news source that the apartment rental market is experiencing substantial growth as more people realize the potential cost savings of using short term lets and temporary housing for business travel.
As the economy continues to worry Main Street and Wall Street, it seems likely that the market for cost-effective alternatives to chain hotels could become increasingly lucrative.