Corporate Hotel Rate Negotiations for 2018 Forecast – Both Buyers and Sellers Have Positions of Strength
October 6, 2017 6:53am
October 5, 2017
By Bjorn Hanson, PhD, Clinical Professor
NYU School of Professional Studies
Jonathan M. Tisch Center for Hospitality and Tourism
As the corporate and contract rate negotiation season is about to begin, the outlook for corporate rates is for sides to negotiate with positions of strength.
The sellers’ position of strength is based on the highest occupancy percent for the US since 1984 - 65.5 percent for 2017 (about the same as it was for 2016).
The buyers’ position of strength is based on slowing US hotel room rate growth (approximate 3.0 percent in 2016 and between 2.0 and 2.5 percent in 2017) and increased use of alternative lodging, specifically “sharing economy” brands.
Corporate and contract rate negotiations generally begin during September and continue into December. Corporate and contract rates represent almost 20 percent of occupied US room nights and almost 30 percent of US lodging industry revenue.
Following among the largest percent and dollar increases in corporate contract rates in decades of generally between 5.75 to 7.0 percent for 2016, 3.0 to 4.0 percent for 2017, the forecast for 2018 rates is for an increase of typically 2.0 to 3.5 percent.
Overall average daily rate (ADR) for the US lodging industry is expected to increase 2.0 to 2.5 percent and about the same for 2018.
There are a few factors that will effect negotiations this year for 2018 rates:
There are several practices buyers pursue to respond to increasing hotel room rates:
Estimates included in this report are based on selected interviews with industry executives and corporate travel executives, analysis of industry financial data, press releases, and information available on hotel and brand websites.
Tags: corporate hotel rate negotiations,
bjorn hanson, phd,
nyu school of professional studies,
jonathan m. tisch center for hospitality and tourism
Bjorn Hanson, PhD, is a clinical professor with the NYU School of Professional Studies Jonathan M. Tisch Center for Hospitality and Tourism. He is a hospitality and travel researcher, widely respected for his industry forecasts and for having created econometric models that transformed business analysis in the field. He has served as divisional dean of the School’s Preston Robert Tisch Center for Hospitality, Tourism, and Sport Management and as co-interim dean of the NYU School of Continuing and Professional Studies (now the School of Professional Studies). Prior to joining NYU, he held the position of global industry leader, hospitality and leisure, at PricewaterhouseCoopers LLP.
Contact: Bjorn Hanson
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Contact: Cheryl Feliciano
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