Increasing hotel room rates and the specter of dynamic pricing will force corporate travel managers to yet again up their hotel budgets for 2007. For some companies, hotel spend has begun to challenge air as the largest cost component of corporate travel programs.

Corporate travel buyers generally are less than enthusiastic about the prospect of another year of rate hikes. With the execution of requests for proposals well underway, however, they soon will have concrete evidence that they'll need to increase travel budgets to meet mounting hotel costs. "We've felt rate increases over the last five years," said Brenda Miller, purchasing manager of travel services for food and beverage company Nestle. "The hotels are sitting in a position where they can dictate prices, and it's causing hotel expenses to outweigh air spending. It's not all about staying that extra night anymore to save the cost of the ticket. It's about how we can avoid paying for that extra night at the hotel."

Adding only to further stoke the volatile flame of hotel rates is dynamic pricing, which many buyers have been buzzing about angrily during the past few months. One of the major disagreements buyers have with the model is that it makes budgeting even more difficult. If room rates fluctuate throughout the year, than how does a corporate travel buyer set aside a stipulated amount of money for hotels?

Yet, as much as travel buyers try to shield themselves from the prospect of dynamic pricing, it is becoming clearer that many hotel chains will further impose the model on corporate buyers.

"From a Hyatt standpoint, we are going to continue the process with specific companies of implementing a dynamic pricing environment," said Kevin Kelly, executive director of sales for Hyatt Hotels & Resorts. Other hoteliers voiced similar aspirations.

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