Corporate Hotel Rate Increases Could Hit 30-Year High

Corporate hotel rate increases for 2016 could be the highest they've been in three decades, according to a new report from Bjorn Hanson, Ph.D., clinical professor at New York University's Tisch Center for Hospitality and Tourism. The outlook emerging from corporate- and contract-rate negotiations that began last month is for rates to climb by a national average of 6.5 to 7.5 percent in 2016. At the low end of that range, the average rate hike will be the highest since 2006; at the upper end, the increase would be the highest to occur since NYU began producing its forecast in 1987.

These corporate and contract rates represent nearly 20 percent of occupied U.S. room nights, according to the report, and almost 30 percent of U.S. lodging industry revenue. And the rise would be coming on the heels of a significant rate increase this year: The overall average daily rate for 2015 is expected to be up by 6 percent.

Hotel rates are increasing at approximately three times the rate of inflation, according to Hanson's report, and they typically do not include many services and amenities -- such as Internet access, fax charges, fitness-center use and breakfast -- that until 2010 often were included in the room rate. In the past six years, however, the trend to charge separately for those amenities has only intensified.

Based on interviews and analysis, Hanson pointed to several responses that are occurring to the rate increases. First, buyers are turning to a growing number of upscale, select-service and limited-service hotels in place of the upper-upscale and full-service hotels that traditionally made up more of their programs. Second, some travel departments now are allowing travelers to select lower-priced hotels that are not part of their negotiated programs, thereby lowering average cost and, in many cases, increasing traveler satisfaction by giving them more choice. And last, there has been greater scrutiny and stricter enforcement of corporate travel policies, as well as ramped-up auditing of both employee expense reports and hotels' adherence to contract terms.

Corporate hotel-rate negotiations typically continue into December.