When it comes to business travel expenses, CFOs have to be aware that hotel rates likely will continue to rise in most locations globally during 2024 despite an expected softening of leisure travel demand, said American Express Global Business Travel (Amex GBT) when releasing its latest forecast.
Amex GBT’s Hotel Monitor 2024 finds that rates could rise by as much as 17.5% in some cities, where tight supply combined with local conditions push the average cost of a room upwards.
Highlights: Trends in business travel expenses
- Most cities should experience rate increases in line with local inflation, following the large price jumps in 2022 and 2023 fuelled by a surge of so-called “revenge tourism.” Softening leisure travel demand should be replaced by the continued uptick in business travel, and meetings and events.
- The evolution of working culture towards more flexible, hybrid and remote models is having a direct impact on business travel patterns.
- An incremental lift in weekend corporate travel and a shift to fewer but longer business trips point to a growing trend of travellers combining business trips with leisure activities. Global hotel chains are responding by expanding extended stay offerings.
- Vacation letting companies also report growing requests for high-speed WiFi and later departures to facilitate remote working, suggesting business travellers are increasingly looking beyond traditional hotel accommodation.
- Even with global inflation beginning to slow, it continues to play an influential role in room rates as increased costs put pressure on hotel operating margins. Chief among these is staff costs, with hotel wages in the US reaching record levels in 2023.
- This rising cost base is disrupting the traditional relationship between supply and demand within the hotel industry, and hotel operators are increasingly limiting inventory to respond to staffing shortages, reduce overheads and protect rates.
- In practice, this means traveling off peak may no longer deliver previously available levels of savings as the link between rates and occupancy weakens.
Good news: Corporates have more power to negotiate better deals
The anticipated changes in leisure travel open the door for corporates to negotiate better deals with hotel partners for 2024 when managing their business travel expenses, Amex GBT pointed out.
Large increases absorbed during 2023 have put an impetus on travel buyers to manage costs, while rising pressure to meet sustainability commitments adds another dimension to programme building, the organisation said.
New programme priorities and changing travel patterns mean travel buyers should reassess existing arrangements and prioritise negotiating better rates in the most frequently visited hotels and cities, Amex GBT advised.
Concentrating spend on a smaller number of providers should help secure better rates, improved terms and other amenities, even for smaller businesses, Amex GBT added.