San Francisco has historically been the tech hub of the U.S. Because of this, it has had a historically high per diem. For years, it has been in the top three cities in terms of highest per diems. This year is no different. Some cities, however, are seeing local tech hubs develop, causing local per diems to rise. Salt Lake City and Orlando—two cities not known for their tech industries—were among the top five cities for per diem growth, comparing Q4 2019 to same period the prior year.
Surprising Surges
Orlando’s per diem rose $31.76 to $335.46, or nearly a 10.5 percent, in the fourth quarter of 2019. According to CWT Solutions Group consultant Eric Schoenfelder, travel managers can blame the city’s booming industrial and tech communities. “Orlando is host to major industrial and high-tech firms, and business travel followed the strong growth of these industries over the past year,” Schoenfelder said. “While demand historically has aligned with supply [there], stronger travel has resulted in slightly increasing prices,” he said. “Until growth [slows] in these industries, we see this trend continuing” for Orlando.
Salt Lake City is similar. Its fourth-quarter per diem rose nearly 20 percent year over year. The biggest change came from the average hotel cost, which jumped 41 percent compared to the year prior. Again, Schoenfelder pointed to the city’s tech and financial industries. “Somewhat under the radar, Salt Lake City has been one of the top tech firm destinations in recent years,” said Schoenfelder. “Pairing with the expansion of financial industry firms, Salt Lake City has experienced a tremendous rate of growth with limited inventory growth.”
Las Vegas saw its per diem rise 12 percent quarter to quarter to $343.73. TripActions VP of booking experience and supplier strategy Daniel Finkel attributed Las Vegas’ growth to a rise in meetings demand, which seemed to peak in 2019. The high times may not last long though. Cvent has forecasted a softening meetings market for 2020, which could influence rates in the city. In addition, Las Vegas will significantly expand its room supply in the coming years, according to BCD Travel global hotel relations senior director Kim Kearns. “Over three years—2020, 2021 and 2022—Las Vegas will see the addition of some 12,000 rooms, bringing the city’s capacity to an estimated 161,953, by far the most in the United States,” she said. Kearns also said the coronavirus outbreak, which already has dinged attendance and caused major convention cancellations, could negatively affect the 2020 hotel industry.
Major Gateways
For Boston, the per diem fell $48.05 in the fourth quarter to $441.18. Hotel rate declines accounted for $36.77 of that amount. Boston had a terrible fourth quarter, according to Kearns, with occupancy rates, average daily rates and RevPAR all hit hard. Even so, she said, “overall health of the market long-term should be positive” with residential development around TD Garden “and 1.9 million square feet of office, residential, hotel and retail around Causeway Street.”
New York’s per diem dropped more than 9 percent in the fourth quarter to $544.71. Rising hotel supply may keep that figure sliding southward. “New York has experienced a softening over the past couple years due to increased room supply along with a continued healthy room pipeline in the books,” said Schoenfelder. Kearns cited New York City Council’s crackdown on unauthorized short-term rentals being thrown out of court as a contributing factor, allowing sharing-economy rentals to undercut hotel rates and depress occupancy at bona fide hotels.
The per diem in San Francisco rose $25.81 in the fourth quarter, or nearly 5 percent, boosted by a $16.84 rise in the average hotel cost and a $13.10 rise in the daily meal costs. CWT expects tamer rate hikes in 2020. Schoenfelder cited a handful of major openings over the last year that added more than 600 additional rooms to the city’s inventory and “slightly eased occupancy issues the market has historically faced,” he said.
Washington, D.C.’s per diem dropped $39.17, or more than 9 percent, due to both hotel and meal cost declines. CWT expects this to turn around this year. “Hotel travel in the D.C. area is largely driven by changes in government policy, as the federal government is a main contributor to the travel industry. With the upcoming election cycle starting to pick up speed, we anticipate travel will pick up and pricing will reverse its recent decline,” said Schoenfelder.
Hot Spot: Rising Car Rental Rates
In the U.S., there is pressure from rental car companies to raise corporate car rental rates, according to CWT Solutions Group senior manager Doyle Gunnell. “In the past two years, after over a decade of continual declining rates, suppliers have made concerted efforts to increase rates in the corporate segment with some stickiness in the small to mid-market segments,” Gunnell said. “The large account corporate segment, however, continues to be very competitive although not as competitive as it has been. It is anticipated that suppliers will continue efforts to increase rates in the corporate segment to offset increasing cost in fleet related areas.”
Risk Scores
GeoSure rated Charleston, S.C., the safety city in the U.S. in 2019, based on likelihood of assault against women and LGBTQ+, injury or violence, theft, illness and political unrest. Charleston scored of 28 out of 100, indicating very low risk. About one-third of U.S. cities had a score between 31 and 39, indicating low risk. The balance of U.S. cities ranked by BTN’s index had a scores between 40 and 58. Kansas City, Mo., saw its risk score rise from 52 to 65. GeoSure chief scientific officer Don Pardew cited the rise in Kansas City’s crime rates. “Even though crime increased and consequently safety decreased in Kansas City, it was violent crime that increased the most,” said Pardew. “Evidence suggests the main reason for the increase in crime rates, and thus a reduction in safety levels, is the city’s inability to attract and maintain law enforcement personnel.”