A few travel industry professionals, including one buyer, recently have questioned why we publish hotel executives’ predictions on negotiated rate increases, which tend to be overly aggressive.
To be sure, what a hotel CEO projects when reporting second-quarter earnings is rarely what we see when negotiations wrap up at the end of the year. They can, however, provide a fairly accurate idea of what buyers should expect when they first sit down at the table.
Take this year, for example. Several hotel CEOs at the start of the summer indicated that they would push for rate increases in the high-single-digit percentage range
. In its recent forecast, Advito suggested that corporate rate increases in most global regions should be closer to about 6 percent. New York University Tisch Center for Hospitality divisional dean Bjorn Hanson, whose forecast for corporate rates was similar to Advito’s, noted that the difference between buyer and seller expectations are “as far apart as ever before.”
Last year, rate increases generally were below what CEOs had projected, but for many buyers, that came after several rounds of aggressive negotiations.
We always want to present the complete picture, but in a 24-hour news cycle, the pixels of that picture sometimes come in one at a time. If the CEO of hotel company X says his sales team will push to raise rates by 10 percent next year, that is news, and we want to get that news out to you as quickly as possible. As other CEOs, analysts, consultants and buyers weigh in, we want to get that out as well. Ultimately, we usually try to tie all the perspectives together into some sort of roundup story.
It’s a valid question, however, to ask whether this can skew expectations. Veteran buyers know the process, but novices and those without much leverage might be more at the mercy at whatever tone the CEOs have set at the beginning of the year.
I plan to pose this question to our advisory board when we meet next week, but I’d love to hear responses from our general audience. When a CEO projects rate increases, should we consider that legitimate news, conveying the tenor of upcoming negotiations from the hotelier side? Or is it just meaningless smoke until placed until the larger context?