Oil Prices & Unrest Drove Down Per Diems in the Americas

In the Americas in 2015, per diems dropped by double-digit percentages in 13 of the 19 non-U.S. cities represented in BTN's Corporate Travel Index. Per diems in Venezuela's capital city of Caracas, however, kept rising, as they did in El Salvador's San Salvador and Costa Rica's San Jose. Caracas also happens to be the only Americas city in the top 50 of all non-U.S. cities, and it's the most expensive one at that, at US $1,702.44 based on the Dec. 1, 2015, exchange rate.

As oil prices dropped last year, hotel prices in countries dependent on oil declined, as well, according to Carson Wagonlit Travel director of Americas hotel solutions Eric Jongeling. "The more heavily [a country] is dependent on oil, the more decrease you're seeing in [the average daily rate]."

He added, "The U.S. dollar strengthened significantly versus the Canadian dollar and that's having a big impact across the board, but the real driver is due to the reliance on oil." Average hotel costs declined 9 percent in each of the five Canadian cities in the Corporate Travel Index, and thus per diems in each also decreased in U.S. currency. Montreal fell the most, 20 percent, followed by 13 percent in Vancouver and 12 percent in Calgary.

Latin America

Six of the 14 Latin American cities experienced per-diem drops greater than 20 percent. San Juan, Puerto Rico's 35 percent, the biggest decline, owed to lower hotel and food costs. An average room night in that city was $112, a 44 percent drop from 2014, and the average cost of three meals decreased to $64 from $86 (see page 26). In Buenos Aires, 40 percent lower hotel costs reduced the per diem 33 percent to $198. Likewise, a room night in Rio de Janeiro fell 27 percent to $139, spurring the city's per diem to decline 32 percent.

While Caracas' hotel rates dropped from $690 to $510, a food shortage propelled daily meal expenses to twice the cost of a hotel, boosting the per diem 28 percent. "Venezuela is its own monster," said Jongeling. "Even though they are dependent on oil, that's not offsetting the impact of inflation for travel there." The country continues to be plagued by high inflation rates—nearly 200 percent in 2015—falling oil prices, a contraction in gross domestic product, a shortage of consumer goods and a malfunctioning government, according to FocusEconomics.

San Salvador, like Caracas saw its per diem increase by a double-digit percentage in both local and U.S. currencies: 13 percent in local money and 14 percent in U.S. dollars. San Salvador's bump came from a 31 percent hotel rate increase, despite a 23 percent decline in food costs.

"The biggest trend in 2015 [for Latin America] was around the political issues that impact pricing," Jongeling said. "We're seeing a trend towards infrastructure improving, more hotels and airports being built and better roads, which will only help them moving forward." Should political problems persist in Latin America, he said, hotel pricing and per diems will continue to decrease in 2016. "There are still a lot of question marks that need to be resolved before [the area] can see a turnaround economically," he said. "The corruption has diminished the public's confidence. … If those issues are resolved, there's a lot of opportunity and growth potential."

Then there's Zika virus. Discovered in Brazil in May 2015, the mosquito-borne disease can cause flu-like symptoms in individuals and birth defects when pregnant women are infected. The World Health Organization has declared Zika a global public health emergency. Jongeling noted, "Travelers are definitely concerned, but we haven't seen too much of [a business travel cost] impact yet traceable to the Zika virus outbreak."