Hotel demand leaves buyers short of room to strike deals

18 July 2001
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19 July 2001 | Liam O'Brien

Travel buyers are finding it increasingly difficult to get best-value hotel deals in Europe with demand for rooms outstripping growth in hotel space, according to a market investigation by American Express.

European hotel room stock is increasing by 2 per cent a year, but demand for rooms is set to rise 15 per cent over the next three years, says its report.

Room rates have increased by 10 per cent over the past year, according to the survey. Business travel managers also have to contend with sophisticated room pricing, where hotels are able to forecast the number of vacant rooms on any day of the year, giving them the balance of power in negotiations.

Pat Hanlon, one of the report's authors and lecturer at the University of Birmingham, said: "Achieving the best deal is becoming tougher for the corporate travel manager, as hotels become more sophisticated at managing their pricing. Added to this, mergers and acquisitions are gathering momentum, as hotel groups seek to build dominant brands. This keeps the power firmly in the hands of the big players."

American Express says the worsening supply situation is occurring at a time when buyers "are coming under increasing pressure to deliver greater efficiencies and cost savings".

Traditional travel management tools are too rudimentary and disadvantage companies in managing travel budgets, it argues, and travel management demands a more rigorous approach, with the use of strong quantitative systems.

But the report's findings do not reflect the UK situation, argued Loraine Holdcroft, executive director of the Institute of Travel Management.

"The general feeling is that supply is exceeding demand and that this situation is likely to continue with new properties coming on to the market," she said.

* Hotel rooms in Paris and London continue to generate the greatest daily revenue in the world, according to a survey by travel consultancy PKF. For Paris, the average daily yield - calculated as room occupancy multiplied by the average room rate - was £130, and in London £127.


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