Our World | On 22, Aug 2013
According to the latest reports from STR Global, hotel occupancy on a global scale is on track to surpass pre-recession levels. Whilst this may sound good for the global economy, it will signal a significant shift in the events market.
For the last 4 years we have been used to being able to wait until the last minute and still pick up some relatively cheap venue space. Sadly this luxury is about to come to an end. Despite the continued investment in new hotel stock, which will see more rooms available in 2014 than in recorded history, occupancy rates are rising and this is music to hoteliers ears as when demand increases so do lead times and prices. Even more concerning is that the highest growth is in the luxury/upscale sector – in other words, prime meeting facility.
2013 is showing the 4th consecutive year of occupancy growth with Dubai leading the way at 86%. In reality that means that from the most basic hostel to the highest level of luxury, 9 out of 10 rooms are full 365 nights a year. During the recession I wrote about hotel investment saying “build them and they will come”; well it looks like I might have been right.
Despite unprecedented levels of new luxury openings, occupancy continues to grow and as a result rates are forecast to rise by at least 4% in 2014. Let’s put some hard numbers around this. The US is seeing a new record high room demand in 2013 with the year forecast to deliver over 1.1 billion sold bed nights. As a consequence average room rates have already increased 3% over 2012.
With demand starting to catch up with and exceed availability, the natural laws of supply and demand tend to lengthen lead times. At first this tends to be slow, almost unnoticeable, but as occupancy tightens there is a tipping point, word gets out and then there is a sudden scramble. Lead times can double in a month and prices can jump by more than 10% as space is squeezed.
Reading The Signs
Whilst this all sounds fanciful given where we have been for the last 4 years, all the signs are there. Domestic and international travel is increasing rapidly. According to UNWTO figures, China’s outbound tourism spend will exceed $100 billion in 2013 overtaking the US to occupy No1. The US, Russia and UK also show growth in international outbound spend, and they have to stay somewhere! Interestingly the US, China and UK are also showing massive growth in inbound tourism as well.
The harsh reality for everyone in the events world is that the days of the last minute bargain are severely numbered as space will be limited, rates will go up, and the best deals will be done early.