Introduction

Global price rise following steady overall recovery

Business and economic volatility may well have led the TV news bulletins in 2011 as never before, as viewers waited for updates on the latest attempts to stave off sovereign bankruptcy or perhaps save a currency. However, at first glance, nobody has told the world’s hoteliers about their duty to provide headline-grabbing developments. Global hotel prices increased by 4% on average in 2011 over 2010, continuing the process of steady recovery from the lows of 2008, albeit at a distinct walking pace. Occupancy rose by 2-3% across most of the year and this relatively modest increase in demand, coupled with slowly re-strengthening economies in some nations, provided the conditions for slight increases in prices worldwide. As we enter a third consecutive year of moderate price rises for guests, the global average price is still lower than it was in 2005, such was the depth of the financial crash-inspired trough.

Regional variations highlight local conditions

There is certainly some more color at a regional level. If the recent flow of economic news from North America suggests evidence of a recovery gathering speed, so do the prices paid in their hotels – up 5% in 2011 compared to 2010, the biggest increase in the region since 2007. European and Middle Eastern hoteliers sympathized with the market’s stuttering economy and increased prices in their own currencies by only 2%. In the world’s faster growing economies, hotel prices kept pace with market movements. Latin America has now appeared as the region with the highest overall increase of all regions since the HPI® launched in 2004 with its Index now at 121. The Pacific saw the most significant price increase by 8% during 2011. Asia’s overall average rate fell by 2%, masking significant increases in some of the region’s business centers and cities.

But averages can mask the much more volatile picture beneath. Four trends stand out:

Natural and political events leave their mark

First, the impact of political and natural events, highlighted in our Hotel Price Index™ review for the first half of 2011, continued through the full year. The unrest of the Arab Spring has hit prices across the region, with prices falling in places from Tunisia to Qatar, where declining demand met a high level of hotel building. In Japan, the impact of the tsunami had reduced prices significantly at one point, although they closed the year down only slightly below the 2010 level overall as the Tokyo market recovered some of its demand.

Weaker economies show resilience

Second, we can finally report positive movement in some of the economies hit hardest over the past four years. Prices rose in Ireland where hoteliers have been struggling with the aftermath of the property bubble collapse. The unrest in Egypt proved to be less of an ill wind for Spain and Italy, which saw a recovery in leisure demand and posted price rises for the first time in some years.

Currency is the big driver

Third, currency movements continue to have a big impact on hotel demand, and therefore prices. Brazilians spent the spring of 2011 enjoying significant strength in the Real, and took off to spend it in the U.S. as never before. As the currency’s strength fell by more than 20% during the summer, Brazilian wanderlust rather cooled and travelers stayed home, driving up demand, and prices, in the main domestic cities such as Rio de Janeiro and Sao Paulo. American travelers are spreading their wings a little more, too, posting increases in demand to both domestic destinations as well as to Europe and the Caribbean. The number of American travelers to Asian regions, which were hit by natural disasters, decreased only slightly.

Business travelers on the move

Lastly, the business travel market remained sound, keeping demand, and pricing, stable in the more business-focused markets around the world, with overall spending on corporate trips up 9% globally for 2011. From Singapore to Hong Kong and Las Vegas, convention and business travel kept hotels busier and prices higher.

This annual version of our report is now in its eighth year, and it remains the most comprehensive survey of hotel prices based on what consumers actually pay in over 85 countries to stay in over 142,000 hotels. If we sell sufficient nights to get a robust data sample, it’s in our Hotel Price Index™. So if you want to know what the Rugby World Cup did for the travel industry in Wellington and Auckland, where to get the most value for your travel budget, or even where to get five star luxury on the cheap, read on, it’s part of the service.