Amex Predicts 2007 Travel Costs To Rise By 4.5 Percent

With rising prices in air, hotel and car rental forecasted for 2007, the cost of a domestic trip that includes all three components will increase approximately $46, or 4.5 percent, while a trip taken internationally will increase $180, or 4.6 percent, from 2006, American Express Business Travel today said in its industry forecast for 2007.

In analyzing the data compiled from statistics, supplier markets, economic trends and interviews with consultants from the company's Advisory Services unit, Mike Streit, vice president and global leader of the TMC's consultancy, said keeping budgets in check in 2007 will be a challenge for many corporate travel buyers.

The New York-based company's global air forecast predicted a 3 percent to 5 percent increase for domestic short-haul economy fares and a 3 percent to 7 percent increase on international long-haul business fares in 2007. Reduced capacity and potential industry consolidation should outweigh weaker demand and the presence of low-cost carriers and lead to higher domestic fares, the report said. To minimize such increases, Streit recommended focusing on policy compliance and tighter controls, as well as increasing online adoption and enforcing that bookings be made more than seven days in advance.

The forecast predicted hotel rate increases across the board, much in line with other analysts' estimates. Priscilla Campbell, American Express' practice leader for hotels and advisory services, said North American prices would increase from 2 percent to 6 percent in the midprice tiers and from 3 percent to 8 percent in the upper tiers. High-demand cities such as New York could rise as much as 18 percent, she said.

Rates also will climb in global markets, particularly in the Asia/Pacific region, which could see increases as high as 25 percent, Streit said. This will mean a much tougher negotiating position for travel buyers.

"The hotel industry across the globe will remain a seller's market," Streit said. "In general, in 2007, corporate discounts will be increasingly difficult to secure." In addition, the forecast indicated that hotel companies would continue to push for dynamic pricing models in negotiations. Buyers, however, would remain largely reticent to accept them, Streit said.

Car rental rates also are expected to rise by 4 percent to 6 percent in North America, said David Balfour, American Express' practice leader for car rental and advisory services. The increase will stem from a slight reduction in supply and an increase in fleet costs, which account for about 40 percent of costs for car rental companies, he said. International rates will remain much more competitive, rising only between 1 percent and 3 percent, he said.