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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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