Amex: Q2 European Hotel Rates Up In Many Cities

Hotel rates in Europe, the Middle East and Africa showed distinct signs of revival in the second quarter, according to the latest American Express Business Travel Monitor Europe, published this week. The monitor, based on bookings made by Amex business travel and card clients, showed that rates rose in 24 of the 49 cities tracked when compared with the same quarter in 2008.

The heaviest rate rises were in cities with oil and gas connections: Abu Dhabi, Moscow and Bergen. All three experienced low-double digit increases. "There are still capacity shortages at these destinations," said Amex director of EMEA advisory services Prashanth Kuchibhotla.

Rates in London and Frankfurt also increased, but by much more modest percentages. Kuchibhotla said that seven of the 24 cities with rate rises went up less than 3 percent, while rates in another dozen cities fell by less than 3 percent, suggesting the overall market is stabilizing. Some of the biggest falls in the period were in Barcelona, Madrid, Paris and Rome, as well as in German cities reliant on manufacturing rather than, as is the case in Frankfurt, finance.

The aviation section of the monitor, meanwhile, revealed two distinct trends: a growing gap in both business and economy cabins between the highest unrestricted fares and the lowest, most heavily restricted discount fare classes; and business class fares generally holding up better than economy fares. Kuchibhotla said these trends held true in most of Europe but were most pronounced in the United Kingdom.

High-end business class fares fell 5 percent across EMEA, while the more restricted fares declined 12.7 percent. In economy class, unrestricted fares fell 16.6 percent and discounted, restricted fares were down 14 percent. The gaps were wider in the United Kingdom, where high-end business fares rose 1.3 percent, yet low-end fares plummeted 19.5 percent. Economy high-end fares were down 11.7 percent and low-end fares down 19.7 percent.

Kuchibhotla said high-end business class fares stayed relatively stable because demand among those still using such tickets is inelastic. However, he added that Amex is selling many more fares in lower fare classes than it was one year ago.

Other airfare trends around Europe included some pronounced drops in business-class fares from France and a fall across the board in Spain. German long-haul fares also were down significantly, especially to the Far East.

Kuchibhotla predicted that the period of fare deflation will end in 2010 as airlines succeed in aligning supply more closely to demand. "I would expect fares to start rising again," he said. "This is the bottom of the market. However, I don't think fares will get back up to where they were two years ago."