US accommodations sector looks set for strong year, despite financial uncertainty

Wednesday, January 23, 2013

US accommodations sector looks set for strong year, despite financial uncertainty

Finding a suitable, yet cost-effective, place to stay while traveling for business is a challenge for many executives. The global economic crisis forced many organizations to reassess their spending on business travel, especially when it comes to corporate suites at chain hotels. Many savvy executives are choosing alternatives to costly hotel rooms, such as corporate apartments, in an attempt to save money without compromising on quality. Despite the lingering financial uncertainty observed in North America and Europe, the accommodations sector in the U.S. could experience a strong year in 2013, reports Business Travel News.

Gradual recovery
In light of the reductions in business travel spending reported in many organizations, hoteliers had to reevaluate how they approached corporate accommodation. While the economic situation appears to be stabilizing, many companies are still actively trying to cut back on business travel expenses. However, as organizations warily start sending executives overseas to conduct business negotiations, demand for hotel rooms is likely to increase, according to Pricewaterhouse Coopers (PwC).

Analysts predict that demand for hotel inventory and pricing are "expected to remain on positive trajectories through 2013." As a result of growing confidence in the private sector's financial recovery, PwC expects demand for hotel rooms to increase by 1.8 percent by the end of the year. Overall occupancy rates could reach 62 percent during the same period, which would be the highest percentage of hotel occupancy since the economic crisis of 2007.

While this is likely to be welcome news to professionals in the hospitality sector, executives who need to secure suitable accommodations may not be as enthused. PwC expects revenue per available room for hotels in the U.S. to increase by almost 6 percent, much of which will be derived from rising rates. As such, many business travelers are likely to opt for more cost-effective alternatives to corporate suites such as serviced apartments and corporate lodging.

Mixed signals
Some economists have predicted that the business travel sector will see significant growth this year, including experts at the Global Business Travel Association (GBTA). However, recent reports from leading financial services organizations such as American Express reveal that while some sectors will see growth, others may not.

According to Business Travel Destinations, a recent report published by American Express (Amex) Global Business Travel suggests countries in emerging markets are likely to experience growth by the end of the year, but traditionally strong business travel destinations such as North America and Europe may not fare as well.

"We are expecting a dynamic landscape for business travel in 2013, with prices likely rising to reflect companies' interest in doing business in growing economies such as Brazil, India, and Russia, but staying flat or even declining in those markets where growth is stagnant," said Hervé Sedky, senior vice president and general manager, global business partnerships and premium services for American Express Global Business Travel, as quoted by the news source.

Data from the Amex report indicates that hotel rates could increase by between 2 and 7 percent in mid-range hotels, and between 4 and 9 percent at luxury properties. High demand and increasing hotel occupancy will be responsible for much of this growth. As a result, executives may be forced to reevaluate their priorities when traveling for business, as the need to save money and increase productivity has never been greater.

With occupancy and rates expected to rise by the end of the year, business travelers have to think smart about where to stay when traveling. Cost-effective alternatives such as serviced apartments and corporate housing are becoming increasingly attractive to budget-conscious executives, and this trend seems likely to continue well into 2013.