Smarter Sourcing Seen Needed to Counter Rising Air, Hotel and Car Rental Rates

Buyer demand, tightened inventories and higher supplier operating costs to continue upward pressure on corporate travel prices in 2007, predicts American Express Business Travel


To keep executives traveling while containing costs, companies will need to source smarter, tighten travel policies, strengthen compliance and adopt online booking tools, travel specialist advises

New York, NY — November 2, 2006 — Continuing demand for corporate travel without a commensurate lift in supply will push costs higher across the board in 2007, with airfares worldwide forecast to increase, albeit at a slower pace than in 2006, and hotel rates pegged to remain at heightened 2006 levels and surge in key business centers, according to the American Express Global Business Travel Forecast.

"Keeping executives on the road while holding budgets in check will be a challenge for organizations in 2007," said Mike Streit, vice president and global leader for American Express Business Travel, Advisory Services. "For instance, as compared to 2006, the Forecast indicates an average domestic North America trip inclusive of air fare, car rental and hotel stay will increase $46, or 4.5 percent, in 2007, and an average international trip with its airfare and hotel stay will increase $180, or 4.6 percent."

Fare Forecast

The American Express Business Travel Forecast prepared by Advisory Services shows a 3-5 percent increase in global domestic economy fares, and a 3-7 percent rise in global international business-class fares. Moderate airfare increases are expected as airlines pare back fare hikes, corporations focus on smarter buying and traveler security remains an area of concern.

Meanwhile, skyrocketing demand for hotels across all regions will continue to give hoteliers more control over negotiations, with few downward pressures available to stabilize pricing. Rising occupancy, limited supply growth and competition between leisure and corporate travelers will leave hotels with the confidence to increase transient rates.

Increases forecast for properties in North America range from 2-6 percent for mid-range hotels and 3-8 percent upper-range properties. In the Europe/Middle East/Africa (EMEA) region, the forecast ranges from 2-5 percent to 3-6 percent; for Asia-Pacific, 0-25 percent to -1-25 percent; and for Latin America and the Caribbean, 2-4 percent to 4-7 percent.

The Corporate Response

"We anticipate that more organizations will ramp up their procurement focus, implement new technology tools at the point of booking, update and strengthen their travel policies and focus on traveler behavior to ensure that negotiated savings are fully realized," added Streit.

He said that the migration to online booking, already well underway in North America, and the "visual guilt" associated with fare transparency will gain even more momentum as a strategic imperative across other regions of the globe. "We also expect to see a growing number of corporations zero in on corporate meetings spending as this area, until now, has been under-examined and is ripe for savings and control opportunities," Streit continued.

Global Air Trend Highlights

Airfares are expected to climb in 2007, though low-cost carrier penetration continues to dampen prices across the global airline industry. In North America, the continued emergence of low-cost carriers, along with weaker demand, will be balanced by reduced capacity and industry consolidation.

"Compliance-to-policy and tighter controls are necessary as airlines reduce capacity, increase fares and work with more sophisticated yield and contract management technology," noted Streit. "Containing costs often becomes as simple as communicating with your travelers about doing the right thing."

In Europe, upward pricing pressure continues to take hold in most regions. More passenger traffic and higher oil prices will be offset by continued low-cost carrier growth, increased capacity on high-traffic routes and competitive fare structure changes.

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