From Hogg Robinson Group

19 August 2013

HRG Interim Hotel Survey

Early signs of recovery but hotel rates fail to match market expectations North America leading the way Uncertainty continuing to impact MEWA
The latest interim Hotel Survey from Hogg Robinson Group (HRG), the award-winning international corporate services company, shows evidence of early signs of recovery in hotel rates but not to the levels expected by the market, in some cases four or five percentage points below what was expected. Average room rates (ARR) have increased in [31/35] out of the top 50 cities. There is, however, substantial disparity in performance across those cities. North America has been the strongest performing region, with growth across all markets and in particular New York, Chicago and Toronto. The Middle East and West Africa has continued to be affected by general uncertainty and increased capacity. Margaret Bowler, Director, Global Hotel Relations at HRG comments: The ea rly sign of recovery in hotel prices is encouraging, what is a surprise however is that in certain key cities the rates are not as high as the market had expected in many cities this is attributed to new supply. On the whole occupancy is increasing faster which, coupled with continued high demand, means we will be likely to see rates climbing in certain markets in the second half of the year and beyond. Key market trends noted this year include:

For the tenth year running Moscow remains the most expensive city for business travellers with an ARR of 263.07 Strong growth in the Oil and Gas industries, has helped Lagos retain its position as the second most expensive city and also substantial increases in Houstons and Aberdeens ARR There are four new additions to the top 50 cities list this year Toronto (26 ), Athens (34 ), Pittsburgh (46 ) th and Chennai (48 ) Munich had the highest increase in ARR of 39.07%; however, this was driven by Bauma Fair, an international triennial event that attracts visitor numbers, far exceeding the number of hotel rooms available Within the UK market, only London, Aberdeen and Edinburgh recorded increases in ARR India is seeing a return to growth, especially in those cities which are also seeing growth in the outsourced IT sector and SME business
th th th

Margaret Bowler continues: Once again we can see from the survey that regional trends are becoming less relevant than they were four years ago, with significant variance across regions. Interestingly the survey also shows the rise and rise of the megacity - 11 of the top 50 cities by room rate are also classified as megacities and we are clearly beginning to see some marked differences between these and other cities that are popular business destinations. The megacities are all showing strong growth driven by a number of common features. Megacities benefit from a combination of classic business travel and high conference and exhibition traffic. They also boast a good market for tourism and have specialised centres for industry segments such as oil and gas for instance. With the advantage of being able to cater for a variety of requirements, megacities can attract a more diverse range of business.

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In comparison, other cities that are simply popular business destinations are subject to the general trend of the market and the consequences of wider economic pressures that would influence fluctuations in demand for example. Some of the city positions in the top 50 league table reflect capacity and the availability of room space; limited new openings result in higher room rates (Moscow for example) whilst a number of new hotel developments results in a competitive rate market (as seen in Abu Dhabi). Clients need to be aware of the rise and rise of the megacity and the impact this growth pattern and dynamic has on their hotel spend. Whilst not uniform, the increase in average room rate highlights that travel remains an important part of winning and conducting business. However, the below expectation increase in ARR is not likely to last and we expect to see further ARR growth into the second half of the year, and an interesting 2014 RFP season.

For further information, please contact: Sallyanne Heywood Hogg Robinson Group Tel: Email: +44 (0) 1256 312 688 sallyanne.heywood@hrgworldwide.com

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FULL RESULTS
Top 50 cities by ARR in GBP & Local Currency
Ranking 2012 1 2 6 5 6 7 8 9 10 14 4 11 13 12 15 22 16 25 23 19 20 17 27 18 21 New 24 29 30 33 37 38 35 New 42 28 32 39 25 36 34 31 46 40 47 New 45 New 41 43 2013 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Jan Jun 2013 APR GBP Moscow* Lagos* New York City* Zurich Geneva Rio De Janeiro Paris* Sydney Stockholm Washington Hong Kong San Francisco Oslo Tokyo* Singapore Rome Frankfurt Dubai Basel Istanbul Sao Paulo* London* Milan Copenhagen Amsterdam Toronto Seoul* Brussels Nairobi Mumbai* Houston Miami Beijing* Athens Barcelona Abu Dhabi New Delhi* Cape town Munich Shanghai Johannesburg Dusseldorf Aberdeen Philadelphia Bangalore Pittsburgh Hamburg Chennai Berlin Madrid 263.07 234.93 222.52 222.14 216.14 209.86 207.69 201.57 200.00 198.10 194.65 190.71 190.36 179.88 175.41 172.00 171.46 168.43 167.19 165.50 165.14 164.63 160.60 160.19 159.74 153.87 151.84 150.44 148.28 146.20 144.20 141.18 139.72 139.15 138.82 138.49 137.77 136.01 135.76 132.65 131.50 131.18 130.01 127.66 121.42 121.36 119.02 118.95 118.90 118.54 Jan Jun 2012 APR GBP 260.14 217.05 203.86 211.25 216.59 202.65 195.82 198.78 200.18 193.26 196.30 180.25 180.80 177.29 168.29 167.73 175.63 162.02 161.30 165.24 161.81 163.53 156.11 170.14 161.97 130.95 149.90 152.54 144.56 137.65 133.16 131.37 131.83 146.92 112.80 146.81 137.17 130.21 97.62 132.85 142.44 143.41 110.23 126.88 114.50 99.91 118.91 129.90 120.06 119.66

GBP Var 1.13% 8.24% 9.16% 5.15% -0.20% 3.56% 6.06% 1.40% -0.09% 2.50% -0.84% 5.80% 5.29% 1.46% 4.23% 2.55% -2.37% 3.96% 3.65% 0.16% 2.06% 0.68% 2.88% -5.85% -1.38% 17.50% 1.29% -1.38% 2.57% 6.21% 8.29% 7.47% 5.99% -5.29% 23.07% -5.67% 0.44% 4.45% 39.07% -0.15% -7.68% -8.53% 17.94% 0.61% 6.04% 21.47% 0.10% -8.43% -0.97% -0.93%

Jan Jun 2013 APR Local

RUR 12,586.54 NGN 56,793.33 USD 343.66 CHF 321.17 CHF 312.50 BRL 657.68 EUR 244.25 AUD 306.97 SEK 2,006.10 USD 305.94 HKD 2,332.35 USD 294.53 NOK 1,683.13 JPY 26,513.94 SGD 336.64 EUR 202.27 EUR 201.64 AED 955.26 CHF 241.72 TRL 462.80 BRL 517.53 GBP 164.63 EUR 188.87 DKK 1,404.70 EUR 187.85 CAD 241.25 KRW 257,505.48 EUR 176.91 KES 19,307.60 INR 12,395.12 USD 222.71 USD 218.04 CNY 1,346.43 EUR 163.64 EUR 163.25 AED 785.45 INR 11,680.59 SAR 1,932.15 EUR 159.65 CNY 1,278.28 SAR 1,868.06 EUR 154.26 GBP 130.01 USD 197.15 INR 10,294.43 USD 187.43 EUR 139.97 INR 10,085.04 EUR 139.82 EUR 139.40

Jan Jun 2012 APR Local

RUR 12,512.81 NGN 54,155.16 USD 321.44 CHF 309.25 CHF 317.06 BRL 594.51 EUR 237.96 AUD 303.68 SEK 2,160.32 USD 304.73 HKD 2,402.10 USD 284.22 NOK 1,663.78 JPY 22,281.89 SGD 335.33 EUR 203.83 EUR 213.42 AED 938.20 CHF 236.13 TRL 469.23 BRL 474.70 GBP 163.53 EUR 189.71 DKK 1,537.12 EUR 196.83 CAD 207.66 KRW 269,939.76 EUR 185.36 KES 18,887.09 INR 11,379.65 USD 209.97 USD 207.14 CNY 1,310.09 EUR 178.54 EUR 137.07 AED 850.12 INR 11,339.78 SAR 1,626.03 EUR 118.63 CNY 1,320.27 SAR 1,778.71 EUR 174.27 GBP 110.23 USD 200.07 INR 9,465.98 USD 157.54 EUR 144.49 INR 10,738.76 EUR 145.90 EUR 145.41

Local Var 0.6% 4.9% 6.9% 3.9% -1.4% 10.6% 2.6% 1.1% -7.1% 0.4% -2.9% 3.6% 1.2% 19.0% 0.4% -0.8% -5.5% 1.8% 2.4% -1.4% 9.0% 0.7% -0.4% -8.6% -4.6% 16.2% -4.6% -4.6% 2.2% 8.9% 6.1% 5.3% 2.8% -8.3% 19.1% -7.6% 3.0% 18.8% 34.6% -3.2% 5.0% -11.5% 17.9% -1.5% 8.8% 19.0% -3.1% -6.1% -4.2% -4.1%

Exc Rate % -0.5% -3.1% -2.1% -1.2% -1.2% 6.8% -3.2% -0.3% -7.1% -2.1% -2.1% -2.1% -3.9% 17.3% -3.7% -3.2% -3.2% -2.1% -1.2% -1.5% 6.8% 0.0% -3.2% -2.9% -3.2% -1.1% -5.8% -3.2% -0.3% 2.6% -2.1% -2.1% -3.0% -3.2% -3.2% -2.1% 2.6% 13.8% -3.2% -3.0% 13.8% -3.2% 0.0% -2.1% 2.6% -2.1% -3.2% 2.6% -3.2% -3.2%

*Mega cities

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Top 5 highest rate increase local ARR

Jan Jun 2013 APR GBP Munich Barcelona Tokyo Pittsburgh Cape Town 135.76 138.82 179.88 121.36 136.01 Jan Jun 2012 APR GBP 97.62 112.80 177.29 99.91 130.21 Jan Jun 2013 APR Local EUR 159.65 EUR 163.25 JPY 26,513.94 USD 187.43 SAR 1,932.15 Jan Jun 2012 APR Local EUR 118.63 EUR 137.07 JPY 22,281.89 USD 157.54 SAR 1,626.03

GBP Var 39.07% 23.07% 1.46% 21.47% 4.45%

Local Var 34.6% 19.1% 19.0% 19.0% 18.8%

Exc Rate % -3.2% -3.2% 17.3% -2.1% 13.8%

Barcelona, Cape Town and Munich have benefitted from good convention business during the period Tokyo continues to do well. The majority of the growth is due to a shift in the exchange rate, the movement of the pound against the yen has been favourable to UK based business travellers Pittsburgh has seen an upsurge in corporate demand from the health, research and Steel sectors and a significant lack of hotel rooms to meet this demand helping to push up ARR

Top 5 highest rate decreases local ARR

Jan Jun 2013 APR GBP Dusseldorf Stockholm Copenhagen Athens Abu Dhabi 131.18 200.00 160.19 139.15 138.49 Jan Jun 2012 APR GBP 143.41 200.18 170.14 146.92 146.81 Jan Jun 2013 APR Local EUR 154.26 SEK 2,006.10 DKK 1,404.70 EUR 163.64 AED 785.45 Jan Jun 2012 APR Local EUR 174.27 SEK 2,160.32 DKK 1,537.12 EUR 178.54 AED 850.12

GBP Var -8.53% -0.09% -5.85% -5.29% -5.67%

Local Var -11.5% -7.1% -8.6% -8.3% -7.6%

Exc Rate % -3.2% -7.1% -2.9% -3.2% -2.1%

Rates fell in Dusseldorf as the city did not benefit from a good convention season. However large shows are booked into the city in 2014, which are sure to drive demand Athens is still struggling with both the sovereign debt crisis and over supply. ARR continues to fall as a Stockholm and Abu Dhabi were affected by backward moves in exchange rates causing drops in room rates in local currency of -7.1% and -2.18% respectively Copenhagen was not helped by an increase in bed stock and an exchange rate pulling the ARR down

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GBP ARR by global regions 180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00

2013 ARR Jan - Jun 2012 ARR Jan - Jun

Europe as a whole sees a slight drop in ARR of 3.34 this was driven mainly by the weaker performance in the UK regions excluding London and some individual key cities such as Athens and Dusseldorf MEWA continues to be effected by the political and socio-economic instability together with the civil war in Syria however growth in the Gulf pushes a slight regional wide ARR growth from 134.16 to 137.52 Asia sees modest growth overall which hides some large swings each way in key cities showing ARR moving from 165.24 to 166.89 The Americas, as previously mentioned, see good ARR growth driven primarily by the corporate market continuing to strengthen in the USA and some key Latin cities the ARR moves from 138.40 to 148.65. Africa sees a slight fall in ARR but key cities such as Lagos continue to do well, overall the ARR moved backwards from 136.65 to 133.39

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Regional Snapshots North America

City New York City Washington DC Houston Boston Chicago San Francisco Philadelphia Los Angeles Vancouver Toronto Ottawa Montreal

ARR GBP 12 203.86 193.26 133.16 172.66 138.42 180.25 126.88 166.90 118.25 130.95 107.63 101.53

ARR GBP 13 222.52 198.10 144.20 177.91 155.86 190.71 127.66 168.52 122.08 153.87 119.03 102.11

ARR Local 12 USD 321.45 USD 304.73 USD 209.97 USD 272.25 USD 218.26 USD 284.22 USD 200.06 USD 263.17 CAD 187.52 CAD 207.66 CAD 170.68 CAD 161.01

ARR Local 13 USD 343.66 USD 305.95 USD 222.70 USD 274.76 USD 240.71 USD 294.53 USD 197.16 USD 260.26 CAD 191.41 CAD 241.25 CAD 186.63 CAD 160.10

Local Var 7% 0% 6% 1% 10% 4% -1% -1% 2% 16% 9% -1%

GBP Var 9% 3% 8% 3% 13% 6% 1% 1% 3% 18% 11% 1%

Exc Rate Var -2% -2% -2% -2% -2% -2% -2% -2% -1% -1% -1% -1%

North America in general is seeing a very positive period as the pace of the global recovery takes hold here more so than in other regions Chicago has seen high growth in ARR driven by the rebound of the convention market coupled with a market that has not seen any new significant hotel product for some time now. The corporate sector has also picked up compared to 2012 as major industries in the manufacturing and financial sectors invest more and recruit more compared to 2011/12 New York continues its ARR growth buoyed by higher corporate demand from the financial and banking sectors and despite additional bed stock coming on line Toronto saw two key conventions driving up demand during this period and also helping keep ARR growth high is that fact that no new hotel openings in 2013 Houston has seen a growth in ARR of 8% in GBP and 6% in USD, this has been driven by the booming oil and energy sectors coupled with a market that has seen very little new product come online recently

Europe

City Moscow Hamburg Geneva Barcelona Frankfurt Paris Brussels Dublin Vienna Athens Madrid Berlin

ARR GBP 12 260.14 118.91 216.59 112.80 175.63 195.82 152.78 98.85 131.02 146.92 119.66 120.06

ARR GBP 13 263.07 119.02 216.14 138.82 171.46 207.69 155.47 99.77 129.95 139.15 118.54 118.90

ARR Local 12 RUR 12,512.86 EUR 144.50 CHF 317.07 EUR 137.07 EUR 213.43 EUR 237.96 EUR 185.66 EUR 120.12 EUR 159.22 EUR 178.54 EUR 145.41 EUR 145.90

ARR Local 13 RUR 12,586.32 EUR 139.97 CHF 312.50 EUR 163.25 EUR 201.64 EUR 244.24 EUR 182.83 EUR 117.33 EUR 152.82 EUR 163.64 EUR 139.40 EUR 139.83

Local Var 1% -3% -1% 19% -6% 3% -2% -2% -4% -8% -4% -4%

GBP Var 1% 0% 0% 23% -2% 6% 2% 1% -1% -5% -1% -1%

Exc Rate Var -1% -3% -1% -3% -3% -3% -3% -3% -3% -3% -3% -3%

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Barcelona saw a very busy convention season in Q1 & Q2 Eurozone countries saw a -3% movement in exchange rate across the period, and so apart from a few cities most saw a modest fall in GBP exaggerated by the movement in exchange rate. Athens continues to suffer the effects of the ongoing sovereign debt crisis in Greece and an oversupply of hotels. Hotels in the upper 4 and 5 star market seem to be dropping rate as demand falls away. Paris saw a strong convention season Q1/Q2 coupled with high corporate demand especially from emerging markets driving the ARR increase.

Asia Pacific

City Hong Kong Singapore Tokyo New Delhi Mumbai Bangalore Hyderabad Beijing Shanghai Sydney

ARR GBP 12 196.30 168.29 177.29 137.17 137.65 114.50 88.22 131.83 132.85 198.78

ARR GBP 13 194.65 175.41 179.88 137.77 146.20 121.42 88.76 139.72 132.65 201.57

ARR Local 12 HKD 2,402.04 SGD 335.33 JPY 22,281.81 INR 11,339.76 INR 11,379.44 INR 9,465.65 INR 7,293.09 CNY 1,310.13 CNY 1,320.26 AUD 303.68

ARR Local 13 HKD 2,332.39 SGD 336.65 JPY 26,514.31 INR 11,680.68 INR 12,395.41 INR 10,294.46 INR 7,525.42 CNY 1,346.45 CNY 1,278.32 AUD 306.97

Local Var -3% 0% 19% 3% 9% 9% 3% 3% -3% 1%

GBP Var -1% 4% 1% 0% 6% 6% 1% 6% 0% 1%

Exc Rate Var -2% -4% 17% 3% 3% 3% 3% -3% -3% 0%

Tokyo continues to do well, however that majority of the growth seen locally had been driven by a large shift in the exchange rate with GBP only moving a modest 1.4%. The movement of the pound against the Yen has been favourable to UK based business travellers Singapore saw a 4% growth in GBP but this was wiped out by exchange rate movements and so locally the city remains flat in terms of ARR India is showing signs of ARR picking up, although in many cases this was helped by the favourable exchange rate. However real growth was seen in Mumbai and Bangalore driven by a lack of new openings in Bangalore, and lots of new demand from the outsourced IT sector and in Mumbai by growth in the SME sector using best available rates. Indian inflation is also running at approximately 7% per annum with hotels regularly seeing 3-5% increases in negotiated rates (Indian CPI)

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MEWA

City Dubai Abu Dhabi Manama Istanbul Cairo Doha

ARR GBP 12 162.02 146.81 159.71 165.24 115.69 172.08

ARR GBP 13 168.43 138.49 162.19 165.50 102.96 174.11

ARR Local 12 AED 938.18 AED 850.10 BHD 94.21 TRL 469.22 EGP 1,095.77 QAR 984.83

ARR Local 13 AED 955.23 AED 785.43 BHD 93.68 TRL 462.79 EGP 1,076.82 QAR 977.04

Local Var 2% -8% -1% -1% -2% -1%

GBP Var 4% -6% 2% 0% -11% 1%

Exc Rate Var -2% -2% -2% -2% 10% -2%

Cairo continues to feel the affects of the recent uprisings seeing demand drop away and as a result hotels fighting for less share and driving down ARR. A large fall in GBP was helped locally by changes in the exchange rate. Istanbul saw over 1150 new rooms open in the last 12 months so it is no surprise to see the city seeing more or less flat ARR compared year on year. The uncertainty in this area of the world being close to the conflict in Syria is also having a dampening effect. Dubai continues to grow ARR with corporate business returning and supply still catching up with demand after several years of stagnation. The increased supply in the mid market in Abu Dhabi is still effecting ARR with a 6% fall in GBP being compounded by a backwards move in exchange rate resulting in a 8% fall locally.

UK

City London Aberdeen Heathrow Manchester Newcastle Edinburgh Glasgow Belfast Liverpool Cardiff

ARR GBP 12 163.53 110.23 109.25 93.13 92.24 89.80 84.93 87.83 87.45 77.92

ARR GBP 13 164.63 130.01 103.98 90.57 88.17 90.47 84.35 86.43 86.30 77.67

GBP Var 1% 18% -5% -3% -4% 1% -1% -2% -1% 0%

Aberdeen saw the largest growth in ARR driven by high demand (from a booming oil and energy sector) and limited new supply in the city, however as new properties come on line later this year and into next we are confident that rates will continue to be high The rest of the UK was either flat or showing modest drops in ARR reflecting the fact that Q1 saw corporate demand flat line in the regions and events that took place in 2012 like the 100th anniversary of the Titanic in Belfast and new car production in Liverpool did not repeat London saw a modest growth of 1% in ARR which considering all the new bedroom stock that has opening in the last 12 months shows that corporate demand remains strong in the capital. The city saw the impact of new openings with ARR moving backwards

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