This column is written by Dr. Bjorn Hanson, divisional dean for the NYU School of Continuing and Professional Studies.
In the U.S., most corporate and contract rates are negotiated September through December, but based on preliminary discussions, it's pretty clear that there are very different expectations between planners and venues.
Meeting and business travel represents almost 20 percent of occupied room nights and almost 30 percent of U.S. lodging industry revenue. But the difference between buyer and seller expectations is even greater than last year.
[JESSIE'S NOTE: Our FutureWatch 2011 report shows that planner-supplier relationships are more important to industry professionals than ever, but that reality doesn't seem to be reaching the negotiation table, if these numbers prove accurate.]
For 2011, the average negotiated rate increased approximately 4.5 percent. And the emerging hotel executive consensus for 2012 is that corporate contract rates will increase by a national average of 6.0 to 8.0 percent or more, but many planners and corporate travel managers are planning only for increases of 3.0 to 5.0 percent.
A preliminary estimate for the result of negotiations is for an average increase for corporate rates around 5.0 to 6.0 percent depending on location and the number of room nights for a specific buyer.
New York, for example is likely to be a location with a larger increase. Hotel executives also are seeking to charge separately for some services and amenities as they had in the past, in addition to implementing rate increases. In recent years, some contract rates included services and amenities such as waiving charges for telephone access charges, fax charges (which can be difficult for some hotels with business centers operated by lessees and would require hotels to pay for the service for guests), fitness centers, breakfast, local transportation and others.
One response of buyers to higher rates is to reallocate the portfolio of contract rate hotels to include more upscale, select service and limited service hotels in place of luxury and upper upscale hotels, for example.
The estimates 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.