Steep hikes in hotel
rates pushed the average U.S. per diem for hotel, rental car and dining costs
up 3.9 percent in 2015, and the climb shows no sign of slowing this year.
Across 100 U.S.
cities, those three categories cost travel buyers $318.80 per day last year, up
from $306.91 in 2014, according to BTN's Corporate Travel Index. For the
third year in a row, San Francisco was the most expensive city for U.S.
business travelers, as its average per diem rose 7.4 percent to $547.34. New
York and Boston also surpassed $500.
Hotel Rates in 2015
The average cost of
a room night for corporate travelers increased 5.6 percent year over year to
$172.80, but rates grew by a larger percentage in 44 of the 100 U.S. markets in
the Corporate Travel Index. Seventeen cities experienced double-digit
increases, including Boston (14.3 percent), Chicago (14.1 percent), Seattle (14
percent) and Los Angeles (15.7 percent). Detroit outpaced them all with a 22.5
percent rise as the city builds back from its 2013 bankruptcy. Allentown, Pa.,
also had a significant increase, 19.2 percent, but smaller cities are more
susceptible to shifts in supply mix, said Advito vice president and principal
Bob Brindley. A Renaissance hotel opened in Allentown in early 2015, and that
likely pushed average rates up.
Daily hotel costs
totaled $370.78 in San Francisco, but it's still not the most challenging
destination, Brindley said. "The southern Bay Area and Silicon Valley are
even crazier than San Francisco. You can't get a room in South Bay, and a lot
of clients that have facilities there are really struggling."
For that area, many
buyers have switched to dynamic pricing agreements—negotiating a percentage off
best available rate—because last room availability agreements hold little value
when rooms are scarce, he added.
New York's daily
hotel rate for corporate travelers increased a comparatively moderate 7.4
percent to $327.63, placing it behind both San Francisco and Boston's $344.18.
New York's recent capacity increases have hindered hoteliers' ability to raise
rates there, according to Ultramar's 2016 Business Travel Trends Report.
Hotel rates
decreased in only 11 of the 100 U.S. Corporate Travel Index cities, seven of
those by less than 1 percent.
Hotel Rates in
2016
In recent earnings
calls, executives from Starwood Hotels & Resorts, Marriott International
and Hilton Worldwide all reported their corporate negotiated rates for 2016 have
increased by mid-single-digit percentages. And while some economic indicators
show corporate travel demand could slow, a seller's market appears set to
prevail for now.
Car Rental Rates in 2015
The average
corporate car rental rate changed little in 2015, as suppliers struggled to
gain pricing traction. Corporate travelers paid an average $47.12 per car
rental day, up 0.7 percent. Most of that pittance came from higher taxes; minus
taxes and fees, the rate rose a mere 8 cents.
In recent earnings
calls, executives from both Avis Budget Group and Hertz said 70 percent of
corporate contracts negotiated last year came back at flat or higher rates, but
they also reported slower-than-expected demand at the end of 2015.
Some buyers feared
consolidation over the past several years would lead to rate increases, but
that has not panned out. "The market is atomized with many different
brands because, unlike airlines, major providers aren't sunsetting acquired
brands," preventing operational economies of scale, according to Ultramar.
Taxes and fees,
which are not negotiable, made up more than one-third of the national average
corporate car rental rate in 2015. One of Brindley's clients in San Francisco,
where taxes and fees made up nearly 60 percent of corporate rental costs in
2015, now requires travelers to take a cab from the airport to an off-airport
facility, where lower taxes offset the cost of the cab. "Airports have
built expensive, elaborate rental car facilities and now are passing the cost
of those on to rental car passengers," he said.
Car Rental Rates
in 2016
Brindley said
average rates likely would increase between 2 and 4 percent, but leisure
travelers and small and midsize companies operating without contracts would
bear most of that. Corporate negotiated rates, on the other hand likely will
remain flat, he said.
Food Costs in 2015
Average daily dining
costs in the United States increased 1.9 percent to $98.74. That's not too far
off from a 2.5 percent increase in restaurant prices last year that owed to
inflation and rising food costs, according to Dinova founder and CEO Vic
Macchio. The corporate dining network reported a 7.1 percent increase in 2015
spending, including a 4.5 percent jump in transactions and a 3.8 percent rise
in average check value.
Corporate daily
dining costs in Santa Barbara, Calif., lurched upward almost 26.9 percent to
$131.77, pushing it past import-dependent Honolulu, where costs shrunk 1.2
percent, as the most expensive city in the United States for dining. Costs also
rose in Washington, D.C., San Francisco, Hartford and Las Vegas, pushing them
all above New York, where meal costs grew just 0.1 percent.
Food Costs in
2016
The National Restaurant
Association projects $782.7 billion in sales this year, up 5 percent. "Outside
of small pockets here and there, the environment is quite robust," Macchio
said.