Amex Data Show Discounts, Pricing Decline Deceleration In Europe

Figures for the first quarter of 2009 from the American Express Business Travel Monitor suggest European airfares and hotel rates may be approaching the bottom of the pricing cycle.

Most airfare classes held steady compared with the previous quarter, the exception being the most heavily restrictive economy fares, described by Amex as "economy lowest," which continued to fall by double-digit percentages. Hotel rates also were lower compared with Q1 of 2008, but the year-on-year declines were generally considerably less extreme than was the case for such figures in the previous quarter.

Perhaps the best news for corporate buyers was that Amex reported a deepening of discounts on negotiated fares, up to 78 percent in the most extreme case. In the current market, said Amex, buyers should look either to buy economy lowest and business lowest, where appropriate, and leverage the generous corporate discounts for everything else.

"As business travel budgets continue to be under tight scrutiny and European companies seek more advice on identifying and maximizing return on investment, those continuing to travel are taking advantage of deepening corporate discounts on the majority of fare classes compared with the end of 2008," said Joakim Johannson, EMEA vice president of advisory services for Amex. "Travel managers and procurement professionals need to ensure they have insight and a holistic view of their program, weighing up any top-class travel with the new discounts available in lower classes."

By no means did every market in Europe follow the general trend. Germany actually saw economy lowest fares rise 7.2 percent quarter-on-quarter but remained down 15.5 percent year-on-year. More typically for Europe in Q1, its quarter-on-quarter fares for economy full and business lowest were flat, while business full was up 2.0 percent, illustrating once again the importance of utilizing corporate discounts.

Hotel rates in Germany were down, but not as sharply as in Q4. Berlin, for example, was down 8.2 percent, compared with a year-over-year decline of 11.7 percent in Q4. Munich was down 15.4 percent, compared with a drop of 21.1 percent in Q4.

In the United Kingdom, economy full and business full airfares saw little change and were both actually up year-on-year by 2.2 percent and 5.2 percent, respectively. Economy lowest fares rose 5.0 percent quarter-on-quarter, but were still down 18.6 percent year-on-year. Business lowest fares were down 3.4 percent month-on-month and 7.1 percent year-on-year.

Hotel rates in London stabilized impressively, down only 3.2 percent year-on-year, compared with a drop of 20.2 percent in Q4 2008. Rates around Heathrow Airport were almost flat.

Not all cities showed signs of stopping the drop. Paris was down 31 percent, while Rome was down 25 percent and Madrid 22 percent. The average European hotel rate decline in Q1 was 9 percent.

Amex forecasts further hotel rate declines in Q2 and Q3, after which it expects rates to start rising again, having been through a full year since prices collapsed.