Bed, business and bytes

Despite wide predictions of a decline in the business hotel market, the sector is booming and chains are planning major expansions. But the needs of customers are changing with technological advances.

With concerns about travel’s role in climate change and Government levying “green taxes” on air travel and cars, as well as rapid advances in telecoms, it was widely predicted that business travel would decline. But the business and budget sectors are looking healthy, with the Hilton hotel group announcing plans to introduce three budget brands in the UK market.

So how is the domestic market faring? Are fewer companies sending representatives away on business in the UK? Business Development Research Consultants’ (BDRC) British Hotel Guest Survey, which has run for the past 16 years, shows 2006 was another good year for the UK hotel market, reaching a record high for total domestic business volume, up almost 8% on 2005 to 57 million “room nights”. The market peaked in 2000 with 55 million room nights, but 9/11 and the subsequent global economic downturn resulted in a 13% decline over the next four years to 48 million room nights in 2004.

The hotel business seems to be in good shape – and in the past seven years branded room supply has increased by almost 50%, with the budget sector doubling its stock since 2000. Supply has definitely not outstripped demand and seems unlikely to do so in the near future.

The report shows that while technology offers an alternative to travel, virtual meetings have yet to sit comfortably with the majority of business people. Last year, 65% of business travellers used hotels for meetings and conferences, accounting for 41% of room nights. But whereas technological advances have so far had little impact on business travel volumes, they have had a major impact on the requirements of business travellers and on their selection of hotels.

Technologies such as broadband internet and wi-fi have become significantly important to business travellers and greatly affect their choice of hotel. When asked what would make them pick one hotel over another, 43% say free broadband internet in bedrooms would definitely influence their choice, 38% say free wireless internet access throughout the hotel would influence their choice. In 2005, 11% of business travellers used the wi-fi service in a hotel to connect to the internet. In 2006, that figure has jumped significantly to 24%. Hotels that don’t, or have no plans to, provide these facilities will find it increasingly difficult to attract business customers.

It had been widely predicted that the internet would continue to lead the way in how businesses choose a hotel or travel and that remains true, not just for the selection of hotel but also for the booking itself. In 2005, almost half of all business travellers contacted the hotel by telephone. Today, that figure has dropped to 28%. Search engines remain the most common starting point, although among the domestic frequent stayers, one in four now go straight to a specific hotel chain website. There is plenty of scope for hotel management teams to improve their internet and search engine optimisation strategies.

The BDRC report also investigates the effectiveness of hotel brand advertising and loyalty programmes. From 2004 through 2006, business travellers’ unprompted awareness of any hotel advertising or promotion had shown a steady increase, but in the past 12 months there has been a decline in overall awareness – despite an increase in ad spend of more than 24%. Loyalty programmes, on the other hand, have risen considerably over the past year. Both awareness and membership of loyalty schemes in the business market reached new highs for this decade after little movement in the past. Almost a quarter of all business travellers say they are a member of at least one hotel loyalty programme.

What should be of additional interest to hotel management is the emergence of a new group of business traveller. In past surveys, two groups have dominated: “baby boomers” born between 1946 and 1964, and “generation X” born between 1965 and 1981. Now there is a new group, “generation Y”. They were born between 1982 and 1988, and have travelled on business since 2000. Although their numbers (as yet) are much smaller than the other two groups – and the survey results more indicative than proven – they are creating a trend that hotel managements need to be aware of.

Whereas in the past, services such as fitness centres and swimming pools would win over the “baby boomers” and “generation X”, these are unlikely to have a significant influence on “generation Y” business travellers. This group is technology driven, and services such as the ability to plug their personal digital music players into in-room speakers will be a major influence.

Although the “generation Y” business group hasn’t yet formed strong opinions on specific issues or brand choice, a pattern is starting to emerge which presents a major opportunity. We know from past surveys that once business travellers establish a preference, they tend to be reasonably loyal to their preferred hotel.

Tim Sander, research director of hotels and hospitality at the BDRC, contributed to this week’s Trends Insight.