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business Travel demand Will Outpace Capacity in 2008 and Drive rate Increases across Air, Hotel, Car Rental and Meetings

-- U.S. Rates Expected to Increase at a Slower Pace While Demand-Heavy Markets Incline Sharply; Hotel Rates Rise Globally --

 

NEW YORK – October 23, 2007 – 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. 

 

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%

Global

1% to 4%

5% to 8%

11% to 14%

11% to 14%

 

 

 

 

 

 

 

 

 

 

 

 

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 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:
    • Air: More sophisticated airline pricing technology and premium prices for certain seats such as flat beds, seats with more legroom and seat location within a cabin.
    • Hotel: Demand still outpaces supply in key markets; hotels have improved yield management practices to maximize profits.
    •  Car: Pressure from taxes and fees add to overall cost of rentals.
  • Pressures that should help mitigate price increases include:
    • Air: Low-fare airlines, stronger policy compliance, increased competition from the USA-EU Open Skies Accord and increased Canadian flight pass products and web-based tools.
    • Hotel: Occupancy remains near flat as a result of newly added supply in some markets.

 

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%

Europe

2% to 5%

6% to 10%

12% to 14%

12% to 14%

1% to 3%

 

  • Pressures which may lead to increases in 2008 include:
    • Air: Strong demand, particularly to Transatlantic, Far East, and South Asia
    • Hotel: High occupancy (exceeding 80 percent in London).
  • Factors which could soften increases include:
    • Air: Competition between air and high-speed rail and low fare penetration.  
    • Car: Highly competitive market.

 

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%

LAC

1% 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-Pacific

1% 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:
    • Air: High cost of fuel, aircraft upgrades, soaring demand, consolidation.
    • Hotel: Real estate and construction costs (slower growth in supply than demand), competition between leisure and business travelers.
  • Downward pricing pressures include:
    • Air: Growth of low-fare airlines and airlines are expected to focus on building market share over profitability in the shorter term.

 

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:

o                                            Lowering use of refundable airfares

o                                            Optimizing use of advance purchase fares

o                                            Defining more narrowly when first/business class fares can be used

o                                            Driving online bookings

o                                            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 trip’s “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

 

Region

2007 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 world’s 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.

 

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Contact:

Margaret Purcell

Sloane & Company

New York, NY 10036

Direct: 212-446-1869

 

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