‘No vacancies’ push hotel rates higher

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Australian Financial Review, 17 June 2011


If you’ve ever paid too much for a bed in a mediocre business hotel in Perth, or scoured Sydney for a hotel room when most have been booked out, now is the time to act.

Companies are being warned to lock in hotel room rates now for 2012 as hoteliers flag a spate of price rises and swelling occupancies amid climbing business demand.

Federal government figures reveal business travel growth increased 1 per cent in the year to March compared with March 2010 to account for 15 per cent of all overnight domestic travel.

“It has become a seller’s market,’’ said Deloitte’s head of tourism, hospitality and leisure, Rutger Smits. “There are nights in Sydney where there are less than 200 rooms available in all of the CBD. That creates the opportunity for hoteliers to lift prices. We have seen last-available rooms going for $1000 a night in Sydney.’’

Mr Smits said the days of low occupancies where guests could pressure hotels to lower prices were over. “There’s always a complaint that hoteliers are gouging, but the corporate buyers will extort hoteliers when they know demand is low and occupancies are down. Is it unfair for hoteliers to raise rates when the opportunity is there?’’

Mr Smits reckoned there was no loyalty in this market. “Corporates will try and rely on loyalty but the hoteliers might make the hard call and walk away. A hotel will always try and service their customers, but if the price needs to go up the corporate customers will be persuaded by the best deal they can get.”

Deloitte forecast rate rises of nearly 20 per cent for Perth in 2012 from 2011, 14 per cent for Sydney, 11 per cent for Melbourne and 10 per cent for Brisbane.

The chief executive of Melbourne’s Hotel Windsor, David Perry, agreed. “The market is very strong: our advice to companies is to lock in prices early. I would not be surprised if our prices increase 10 per cent next year.’’

The director of corporate sales for Accor Australia, David McDonald, said the corporate negotiation period began in a few months and “availability” was likely to be the key issue in Sydney, Melbourne, Brisbane and Perth. “For many companies, getting access to rooms when they require them – especially at short notice – is the key requirement, and procurement managers appreciate that this will involve premiums to standard rate rises,’’ he said.

FCM product manager and corporate travel booker David Strickland said clients should start their contracting period for next year early to secure the best deals.

“If clients leave it too late, hotels know how much business they have on their books for the year and might be less likely to negotiate,’’ Mr Strickland said.

Rutger Smits was the National Leader for Tourism, Hospitality and Leisure at Deloitte until October 2011. He now manages his own hotel consulting business, AHS Advisory

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