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Executives adjust to cheaper hotels as economy slips

Traveling executives from Dell Computer Corp, once "spoiled" by rooms at Hilton and Marriott hotels, are checking into the cheaper AmeriSuites or Candle-wood Suites these days.

Across the Atlantic, Unilever employees are staying at home more and using video conferences and telephones for meetings since the world's biggest food and soap maker scaled back travel after last's year's Sept. 11 attacks in the US.

Faltering economies are holding back a recovery for the hotel industry. As companies cut costs and tourists seek bargains, no-frills accommodations have an edge over the luxury rooms offered by Hilton Hotels Corp and Six Continents Plc, owner of the Inter-Continental brand. The four-star chains rely on corporate travel for as much as two thirds of sales, analysts said.

"We're trying to shift market share to some of the newer brand hotels to save on costs," said Jo Ann Gallardo, global hotel administrator for Texas-based Dell Computer, the world's second-largest computer maker. "A lot of people are accustomed to full-service hotels -- we've got a lot of spoiled travelers."

Dell saves between 30 percent and 45 percent on rates when booking at hotels such as Prime Hospitality Corp.'s AmeriSuites, Gallardo said.

Cutbacks in air travel and hotel stays will contribute to a 3.5 percent reduction in global business travel this year to US$379 billion, the World Travel & Tourism Council said.

The shift favors cheaper lodgings such as rooms by Candlewood Hotel Co, which charges US$95 for a suite in Las Colinas, Texas, near Dallas. That comes at the expense of four-star chains such as Hilton, whose executive room with terry-cloth robes and bed turn- down service costs US$152 a night at the Dallas Fort-Worth International Airport.

"Companies are trading down," said Matthew Davis, global head of corporate travel consulting at American Express in London, which counts GlaxoSmithKline Plc and Procter & Gamble Co among its largest clients.

Both Marriott International Inc and Hilton posted 73 percent occupancy in the second quarter after discounting the average room rate by more than 6 percent. Candlewood filled 5.3 percent more rooms with 79 percent occupancy after an 11 percent price cut.

It's a similar story in Asia. Raffles Holdings Ltd, owner of the Raffles Hotel in Singapore whose rates start at US$316 a night, said second-quarter revenue per room fell 9 percent. The average occupancy for Singapore hotels was 73 percent in May.

In Europe, revenue per room in major cities fell 10 percent in June, with drops of 14 percent in London and 20 percent in Paris, according to Deloitte & Touche hospitality consultants. The overall rate is an improvement from the 12 percent drop last September and the 19 percent decline in October.

US hotels will recover slower than previously expected, PricewaterhouseCoopers said earlier this month when it cut its forecast for hotel-room demand this year a second time. The firm said revenue per available US hotel room, a measure of average occupancy and room rate, will fall 2.3 percent, to US$49.68.
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