Business Travel Demand Will Outpace Capacity in 2008 and Drive Rate Increases Across Air, Hotel, Car Rental and Meetings

The American Express annual Global Business Travel Forecast released today reports that demand for business travel services will again outweigh supply in 2008, driving continued increases in rates across air, hotel, car rental and corporate meetings and events. While worldwide airfares are expected to continue their climb, hotel rates are projected to experience high double-digit increases in demand-heavy markets across the U.S., Europe and Asia.

Travel managers and procurement professionals can expect another capacity-restricted, challenging year and a continued push to keep travel and entertainment budgets in check. However, opportunities still exist to further control costs without curtailing business travel, said Mike Streit, Vice President and Global Leader for American Express Business Travel Advisory Services. Heading into 2008, successful T&E management strategies will focus not just on controlling travel expenses, but also on identifying additional areas to control costs and save, such as entertainment and related services including corporate meetings and events.

Global Business Travel Forecast

The Global Business Travel Forecast, prepared by Advisory Services, predicts that the average cost of domestic and international trips will increase.

Streit continued, In 2008, we expect a domestic trip inclusive of airfare, car rental and hotel stay will increase six percent, or $63 USD, bringing the average trip cost to a total of approximately $1,110 USD. For an international trip, the increase is expected to be nearly seven percent, or approximately $205 USD, bringing the cost of an average trip to $3,171.

Global 2008 Forecasted Increases
Region Published Airfares Published Hotel Rates

Domestic /

Short-Haul

(Economy Class)

International /

Long-Haul

(Business Class)

Mid-Range Upper-Range
North America 1% to 5% 5% to 10% 4% to 7% 5% to 8%
Europe 2% to 5% 6% to 10% 12% to 14% 12% to 14%
Asia-Pacific 1% to 3% 3% to 6% 18% to 22% 18% to 22%
LAC 1% to 2% 4% to 7% 8% to 12% 7% to 10%
Global1% to 4%5% to 8%11% to 14%11% to 14%

Global Airfare Forecast

Pricing pressures that have influenced the rise in airfares in the past are expected to continue in 2008, but more competition in certain markets should help ease increases.

  • Fuel costs, improvements in airline inventory and pricing technology, capacity constraint and demand for long-haul are likely to drive price increases.
  • We anticipate that greater competition through the USA-EU Open Skies Accord, growth of low-fare pricing models and more efficient aircraft will temper increases.

Global Hotel Rate/Meetings Spend Forecast

We expect that hoteliers around the world will continue to benefit from their market position in 2008.

  • High demand and slow growth of supply is likely to force prices up and will impact access hoteliers give to last room availability rates. Companies may also encounter minimum and maximum stay requirements and instances when corporate rates do not apply.
  • Continued infusion of capital to hotels should benefit travelers through renovations and upgrades of properties and additional amenities, particularly in lower market tiers. However, these improvements will force hotels to maintain rates at historic highs.
  • Rising hotel rates are likely to contribute to the expected increase of 8% -10% percent in global meeting spend (guestrooms account for nearly half of all meeting spend, excluding airfare).
  • Focusing on meetings as an area of savings will help drive down T&E expenses.

Regional Highlights

North America Air/Hotel/Car Forecast and Trends

The Forecast shows that in North America prices are expected to increase across transient segments, although it is expected to be at a slower pace due to anticipated slowing growth in business travel.

North America 2008 Forecasted Increases
Region Published Airfares Published Hotel Rates

Car Rental

Costs

Domestic /

Short-Haul

(Economy Class)

International /

Long-Haul

(Business Class)

Mid-Range Upper-Range
United States 1% to 5% 5% to 10% 4% to 6% 5% to 7% 2% to 4%
Canada 2% to 5% 7% to 10% 5% to 7% 6% to 8% 2% to 4%

North

America

1% to 5%5% to 10%4% to 7%5% to 8%2% to 4%
-- Forces driving prices up (as much as 14 percent for hotels in key
   US cities) include:
    --

Europe Air/Hotel/Car Forecast and Trends

Europe 2008 Forecasted Increases
Region Published Airfares Published Hotel Rates

Car Rental

Costs

Domestic /

Short-Haul

(Economy Class)

International /

Long-Haul

(Business Class)

Mid-Range Upper-Range
France 0% to 2% 10% to 12% 9% to 11% 9% to 11% 1% to 3%
Germany 3% to 4% 6% to 8% 7% to 9% 10% to 12% 1% to 3%
Sweden 4% to 6% 6% to 8% 15% to 17% 15% to 17% 1% to 3%

United

Kingdom

(-5)% to (-10)% 1% to 2% 19% to 22% 21% to 24%

1% to 3%

Europe2% to 5%6% to 10%12% to 14%12% to 14%1% to 3%
-- Pressures which may lead to increases in 2008 include:
    --

Latin America & the Caribbean (LAC) Air/Hotel/Car Forecast and Trends

Latin America & the Caribbean 2008 Forecasted Increases
Region Published Airfares Published Hotel Rates

Car Rental

Costs

Domestic /

Short-Haul

(Economy Class)

International /

Long-Haul

(Business Class)

Mid-Range Upper-Range
Argentina 4% to 7% 6% to 8% 10% to 15% 5% to 10% 1% to 3%
Brazil 3% to 5% 6% to 9% 6% to 8% 5% to 7% 1% to 3%
Mexico (-6)% to (-9)% 3% to 5% 2% to 3% 3% to 5% 1% to 3%
LAC1% to 2%4% to 7%8% to 12%7% to 10%1% to 3%
-- Rate increases can be attributed partially to:
    -- Air: Strong demand from economic growth and high oil prices.
    -- Hotel: Low supply and high demand for majority of the year.
-- Several forces may deflate rate increases including:
    -- Air: Increased capacity, the growth of low-cost airlines and
       fare matching strategies by incumbent airlines.
    -- Hotel: New mid-range properties are expected to be added by the
       end of 2008.
    -- Car: More competition for travelers' business.

Asia-Pacific (JAPA) Air/Hotel/Car Forecast and Trends

Asia-Pacific 2008 Forecasted Increases
Region Published Airfares Published Hotel Rates

Car Rental

Costs

Domestic /

Short-Haul

(Economy Class)

International /

Long-Haul

(Business Class)

Mid-Range Upper-Range
Australia 1% to 3% 5% to 7% 9% to 14% 9% to 14% 1% to 3%
China 2% to 4% 4% to 6%

11% to 16%

9% to 14% N/A
Hong Kong 2% to 3% 5% to 7% 12% to 16% 13% to 17% N/A
India (-1)% to 1% 0% to 2% 34% to 38% 38% to 41% N/A
Japan 3% to 5% 4% to 6% 7% to 10% 6% to 9% N/A
Singapore (-1)% to 1% 2% to 4% 27% to 29% 27% to 29% 1% to 3%
Asia-Pacific1% to 3%3% to 6%18% to 22%18% to 22%1% to 3%
-- The summer Olympics in Beijing is expected to drive up prices along
   with economic growth, an increasingly mobile population and:
    --

Other 2008 Trends to Watch

Compliance & Change Management Strategies

-- To handle increasing costs, companies should consider building
   travel program compliance through subtle change management
   techniques including seeking greater high-level executive
   involvement in policy implementation and clearly communicating
   policy details.
-- Change management will likely focus on changing behavior in 5 key
   areas:
    -- Lowering use of refundable airfares
    -- Optimizing use of advance purchase fares
    -- Defining more narrowly when first/business class fares can be
       used
    -- Driving online bookings
    -- Improving use of preferred suppliers, especially hotels where
       compliance has historically hovered around 50%
-- Out of policy monitoring tools are expected to be implemented more
   widely generating greater policy compliance. We anticipate a 15
   percent to 20 percent increase in sales of tracking/monitoring
   tools could be achieved.

Eco Initiatives Evolve into Responsible Business Travel

  • Companies are expected to increase the focus on responsible business travel practices related to the environment and the safety and security of travelers.
  • Companies are expected to increasingly focus on understanding and measuring a trips carbon footprint.
  • Although carbon offsetting remains popular, we think that this is likely to prove to be a short-term solution that will be combined with policy and program management strategies.

Online Penetration Expected to Increase

Region2007 Online

Penetration Rates

2008 Online Penetration

Rate Forecast

United States 51% 55%
Canada 21% 25%
Latin America 10% 15%
Europe 23% 30%
JAPA - Australia 38% 50%
  • We have seen procurement and emerging technologies drive usage of online booking tools, with 51 percent of American Express Business Travel clients in the US booking transactions online.
  • In our experience, travel counselors are increasingly booking the complicated and multi-part trips while companies are taking advantage of online solutions for more simple itineraries.

Forecast Methodology

Projections were based on a combination of statistical forecasting, in-depth research of supplier markets, regional economic trends, interviews with American Express industry analysts, and analyses of reports generated within and outside American Express. Smith Travel Research was also utilized for hotel research into specific markets and trends.

The forecasts and projections provided in the report are based on information gathered from a number of different internal and external sources and no representation or warranty is made as to the accuracy of the forecasts or projections made herein. In addition, actual changes in business travel costs could vary significantly from forecasted data, particularly as a result of unforeseen future political, economic and/or environmental events.

All ranges represent forecasted year-over-year increases.

About American Express

American Express Business Travel, a division of the American Express Company, is dedicated to helping its clients realize the greatest possible value from their investment in travel through increased cost savings, outstanding customer service and greater spend control. For small businesses, medium-sized enterprises and multinational corporations, American Express Business Travel provides a combination of industry leading booking technology, travel management consulting expertise, strategic sourcing and supplier negotiation support and customer service available online and offline, around the world.

American Express operates one of the worlds largest travel agency networks with over 2,200 travel service locations in over 140 countries and territories worldwide. The Company processed US$21.8 billion in global travel sales in 2006.

American Express Company (www.americanexpress.com) is a diversified worldwide travel, financial and network services company founded in 1850. It is a world leader in charge and credit cards, Travellers Cheques, travel, business services and international banking.

Contacts:

American Express Business Travel
Tracy Paurowski, 212-640-8409
tracy.j.paurowski@aexp.com
or
Sloane & Company
Emily Porro, 212-446-1874
eporro@sloanepr.com

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.