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Rising hotel rates could prompt executives to seek alternatives

Tuesday, April 30, 2013

Rising hotel rates could prompt executives to seek alternatives

For many organizations, choosing suitable and cost-effective accommodations for their executives can prove challenging. Some companies are slowly beginning to test the waters when it comes to expansion as the economy shows signs of gradual recovery, but minimizing expenses is crucial to ensuring lasting profitability. For many firms, corporate suites at chain hotels have proven popular in the past, but as organizations become increasingly focused on scrutinizing their bottom lines, alternatives to the traditional hotel room may prove alluring. According to Business Travel News, many large chain hoteliers have raised rates significantly in recent months, which could be a boon to service providers offering furnished extended stay apartments and other accommodation options.

Challenging market conditions
The news source reports that the overall average daily rate (ADR) at hotels across North American Starwood Hotels & Resorts properties rose by 4.2 percent last year. Rates at the chain's premier locations, particularly those belonging to the company's St. Regis/Luxury brand, increased by almost 8 percent. This situation was similar for all other chain hoteliers with the exception of Sheraton, with service providers in all regions of the world reporting increased ADRs at their properties.

While many service providers in the hospitality industry reported rising room rates across their portfolios, independent analysis reveals that in some areas, ADR decreased, particularly in Europe. In a separate report, Business Travel News reports that according to STR Global, ADR in Europe actually declined by 4.8 percent in U.S. dollars, and 0.9 percent in euros. Despite the reduction in the average cost of a night's stay at many hotels, overall occupancy increased, with a slight uptick of 0.6 percent reported across the continent. Cities that saw the largest rise in ADR were Tel Aviv, Israel, at 19.5 percent; Frankfurt, Germany, at 16 percent; and Istanbul, Turkey, at 10.5 percent. The only European city to post double-digit losses in its ADR was Warsaw, Poland, which saw a decline of more than 12 percent.

Supply and demand
Although the cost of accommodations is a key consideration for companies seeking to expand their operations, the domestic hospitality market may be of concern to business travelers throughout the coming months. According to USA Today, key markets across the U.S. are experiencing strong growth in terms of ADR and consumer demand in both the corporate and leisure travel markets.

Jan Freitag, a senior analyst at STR Global, told the news source that in cities such as San Francisco, Calif., demand for hotels has increased so dramatically that many visitors are seeking alternatives across the Bay area in places like Oakland and San Jose. As a result, ADRs at smaller establishments are also rising. However, as expensive as accommodations in the City by the Bay can be, they cannot compare to New York City, which remains the undisputed king of the expensive hotel room. The news source reports that the ADR of high-end hotels in Manhattan is almost $100 more expensive than in San Francisco, its closest rival. The ADR of a suite in New York costs around $314 per night, making the Big Apple an increasingly expensive place to visit and do business.

For these reasons, executives and tourists alike may want to consider alternatives to chain hotels such as serviced apartments. Combining the luxury and convenience or corporate suites with the comforts of home, this type of accommodation is ideally suited to individuals planning to stay in a city for a prolonged  period of time and is often located within easy reach of downtown areas. When it comes to service, Bridgestreet's furnished extended stay apartments and corporate housing will exceed the expectations of even the most discerning traveler.