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 Hotel Rates for Both Mid-range and Upper-range Properties
will Increase by 1 to 3% in 2005

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NEW YORK - Oct. 18, 2004 -- The American Express Global Business Travel Forecast for 2005, released today, indicates a continued steady revival of the global business travel industry. 

Although the pace varies significantly by region and country, published air and hotel prices are expected to rise incrementally next year as business travel demand recovers, outpacing the growth of supply in several markets. At the same time, increased competition - particularly in the airline sector in several regional markets - is likely to dampen any significant increases in business travel costs.

For 2005, American Express forecasts that global economy/short-haul fares will rise by 0-3%, and international business fares by 2-5%. On the hotel side, room rates for both mid-range and upper-range properties will increase by 1-3%.

"Economic recovery is fueling business travel demand around the world, with particularly strong demand between Europe and North America, South America, and across the Pacific," said Matthew Davis, Director, Global Consulting Services, American Express. "An industry-wide rebound has been dampened only by slim margins for the major North American airline carriers."

Davis continued, "While rising passenger traffic and hotel occupancies help contribute to a healthier travel industry, forecasted price increases mean that travel managers must vigilantly maintain an effective travel management program. The careful application of technology tools and expense management solutions are critical in allowing corporations to maximize their travel investment, even in a rising fare environment."
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American Express' Regional Forecasts for
Global Business Travel Prices in 2005
Region
Air
Domestic/Short Haul (Economy)
Air International (Business Class)
Hotel 
Mid Range
Hotel 
Upper Range
North America 1-3% 2-5% 0-3% 0-3%
Asia Pacific 3-4% 4-5% 2-3% 3-4%
Europe (-3)-1% 2-4% 1-3% 0-1%
Latin America and the Caribbean 2-3% 3-5% 1-2% 0-2%
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Ongoing Changes to Airline Industry Due to Low Cost Carriers

Low cost carriers will continue to impact the airline industry in 2005. For example, in the U.S., typical business fares are expected to rise between 1-3% for the year, propelled by economic recovery, supplier pressure to recoup economic loss, and an increase in passenger traffic. However, price increases are likely to be tempered by intense competition, particularly from low-cost airlines as they challenge the major hub-and-spoke airlines.

In Europe, the effects of SARS and the Iraq conflict on passenger traffic have diminished, as European carriers experienced demand resurgence. At the same time, a few European network carriers are experiencing financial recovery. Attempts by the airlines to significantly increase fares, however, are likely to be dampened by competition from low cost carriers, a trend that has gathered momentum over the past two years. But the stability of the low cost model in Europe is uncertain.

Asia has also experienced phenomenal activity in the low cost arena. In India alone, ten low cost airlines are in, at least, the planning stage. Low cost activity has also been strong in Thailand, Singapore and Australia, and new entrants are making inroads in Japan, China and the Gulf States.

Hotel Trends

On the hotel front, the negotiations environment will be slightly more challenging than in recent years.

In North America, corporate hotel rates are expected to rise in 2005, driven by rising occupancies as a result of increased demand, in proportion to limited supply growth. The situation is similar in Europe, where business recovery regionally and globally, plus market specific airline competition, is expected to exert upward pressure on published rates. In addition, in Europe a new focus on dynamic pricing will enable more hotel companies to price accordingly in response to peaks and valleys in demand. This will enable suppliers to raise rates in the short term if growing occupancies are sustained.

"Now more than ever, companies need to consider the effect of foreign exchange rate changes when analyzing their global spend," Davis continued. "These same air trends are affecting hotel occupancies around the world. Increased fare competition, rising passenger traffic and a more stable business environment are likely to drive up hotel occupancies. It is clear that the outlook for 2005 bodes well for the hotel suppliers, and it is likely that published rates will rise globally."

In the Asia-Pacific region, hotel rates will grow considerably, especially in comparison to other regions of the world. Economic growth rates, particularly in India and China, are driving occupancies. Supply will be limited for the short-term due to the lengthy building process. In particular, the fastest-growing economies and those most severely affected by the shocks of the past few years will be under the heaviest pricing pressure in 2005.

Methodology

Projections were generated 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.

The global forecasts, which summarize our findings in select country markets, represent estimated projections based on in depth analyses of historical pricing and costs, including factors and variables that are likely to affect pricing. Actual changes in business travel costs could vary from forecasted data, particularly as a result of unforeseen future political, economic, and/or environmental events.

American Express Corporate Services

American Express Travel Related Services, Inc. operates one of the world's largest travel agency networks, recording $16 billion in worldwide travel sales in 2003. 

The American Express Company is a diversified worldwide travel, financial and network services company founded in 1850. It is a leader in charge and credit cards, Travelers Cheques, travel, financial planning, investment products, insurance and international banking.


 
Contact:
American Express Travel Related Services, Inc.
http://www.americanexpress.com
ashanks@sloanepr.com
Also See: Economic Revival in Second Half of 2003 Builds Momentum for Robust Lodging Demand Recovery in 2004 / October 2003
Hospitality Industry: Top 10 Thoughts for 2004 / Ernst & Young / January 2004


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