U.S. Domestic Average Airfares Rise as Airlines Flex New Pricing Muscle

Companies tighten T&E policies, toughen-up compliance and target indirect travel expenses to contain costs


The sharpest increase domestically was found within the budget-tier hotel category. In four out of the past five quarters, across 34 top domestic markets, budget hotels cost more than or as much as economy-tier rates. In the fourth quarter of 2006, the budget category was up 19 percent compared to the same quarter in 2005.

Average Domestic Booked Hotel Rate by Tier

"Budget hotel rates increased to such high levels because they are trying to attract more of the business travel market," said Streit. "They are heavily investing in capital improvements such as room renovations and adding in-room amenities, in order to better position themselves competitively as occupancy rates remain high and companies start to trade down to lower-cost alternatives within their hotel program."

Car Rental Rates Continue to Ascend

A trickle-down effect has occurred in the car rental market forcing price increases. The cost of fleets has drastically increased from 12-20 percent, putting pricing pressure on the major car rental companies. Car rental firms have pushed their prices up approximately 4.5 percent in order to offset higher operating costs.

Average daily car rental rates:

  • 2000 — $61
  • 2001 — $63
  • 2002 — $64
  • 2003 — $65
  • 2004 — $65
  • 2005 — $66
  • 2006 — $69

"Car rental spend is too often left unmanaged," said Streit. "However, more aggressively managing car rental purchasing could be a hidden savings jewel for many companies. Those who closely manage car rental expenditures and aggressively bid their business can achieve savings in excess of 10 percent. We are starting to see many clients shift focus toward exerting greater control over this aspect of their travel program."

Streit added that the industry of business travel remains unpredictable, and the best way for companies to prepare for the unexpected is by taking a holistic approach to travel management, focusing on strategies that will help them make the most of every travel and entertainment dollar they invest.

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