Travel costs are almost certain to increase at a faster pace in 2014, posing budgetary challenges for many organizations, according to analysts and meeting planning firms that handle both corporate and association business. However, they also say that strategic negotiating, along with flexibility on location and dates, will enable planners to overcome most obstacles.
Perhaps contributing most to the challenge is the fact that hotel rates are continuing to rebound from their recessionary lows of a few years ago. In 2014, average daily rate (ADR) at U.S. hotels is expected to grow by 5.4 percent, while occupancy is anticipated to grow by 1.9 percent, according to a recent forecast from PKF Hospitality Consulting, using figures from Smith Travel Research.
“Measured in real terms, ADR has been growing roughly two percentage points ahead of inflation in recent years,” says Mark Woodworth, president of PKF Hospitality Research.
Increasing rates vary widely by location, with Boston, San Francisco, Miami, Honolulu, Los Angeles, Pittsburgh, Indianapolis and Portland, Ore., among the most robust markets, according to PKF. Conversely, Kansas City; San Diego; Tucson, Ariz.; Salt Lake City; Albuquerque, N.M.; Philadelphia; and Washington, D.C., are forecast to achieve ADR growth that is less than the inflation rate during the year ahead.
Similarly, the CWT 2014 Travel Price Forecast predicts rising costs across the board—for airfares, hotels, ground transportation and other event components. These costs are putting the squeeze on many organizations, says Tony Wagner, vice president-the Americas, for CWT Meetings & Events.
“You’re not seeing budgets keeping up with rising costs,” he says. “It puts pressure on planners and budget holders. How do you operate effectively in a seller’s market?”
Nola Conway, president of Global Destinations Marketing, is facing a similar challenge.
“Budgets are pretty much staying the same,” she says. “But despite rising hotel rates, clients are expecting us to produce the same program that we did last year.”