Citing a "continued steady revival" of global business travel, American Express in its 2005 global travel forecast predicted price hikes of a few percentage points for airline and hotel purchases around the world. Varying by region, travel costs for corporations are forecast to move higher, impacted by recovering travel demand, generally improving economic conditions, high fuel costs, recovering transoceanic traffic and dynamic hotel pricing.
On a global level, American Express anticipates marginal increases for economy/short-haul fares and price hikes as much as 5 percent for international business class purchases. "In 2005, rates offered by airlines won't be in the best interest of companies," said Matthew Davis, Amex director of global consulting. "The discounts will be lower."
Amex forecasts a 1 percent to 3 percent rise in hotel rates at both midscale and upscale properties. "It is clear that the outlook for 2005 bodes well for the hotel suppliers," Davis said. "We are seeing dynamic pricing and the last-minute rates won't be there."
At the same time, American Express said downward pressure on travel pricing, particularly on airfares, would be generated by low-cost competition, particularly in Europe, and market liberalization in Asia/Pacific.
Nevertheless, American Express expects airline and hotel prices in Asia/Pacific to grow the fastest, matching or outpacing increases in all other regions. "In particular, the fastest-growing economies and those most severely affected by the shocks of the past few years will be under the heaviest pricing pressure in 2005," the company said.
Short-haul/economy fares are projected to jump as much as 4 percent, while international business class rises as much as 5 percent. In addition to growing demand, which has pushed traffic beyond pre-SARS levels, Amex cited improved inflight products, more direct services and new airports. It also noted downward pressure on fares from "phenomenal" growth of low-cost carriers.
Japan is expected to experience the largest increases in economy and intercontinental business class airfares, while Singapore may see a reduction in short-haul fares.
Amex is telling corporate clients to prepare for increases in Asian mid-range hotel rates of 2 percent to 3 percent, and as much 4 percent in the upper range, citing supply and economic recovery.
In the upper range, Japan's projected 4 percent to 5 percent increase is largest, while Hong Kong rates are expected to remain flat. In the mid-range, Japan's increase of 1 percent to 2 percent is expected to be among the more modest, as other country-specific rates rise between 3 percent and 4 percent.
In Europe, France, Sweden and the United Kingdom each are expected to show 2 percent to 4 percent increases in international business class airfares, with Germany's increase slightly smaller. Intra-European economy fares, however, are expected to drop throughout much of the region, except in France, where there is limited low-cost activity. Amex said competition for marketshare on many European routes likely would outweigh traffic growth and keep prices down, but that the "stability of the low-cost model in Europe is uncertain."
Amex expects rates at European midscale and upscale properties to increase by as much as 4 percent across the region. Amex cited growing occupancy levels and more emphasis on dynamic pricing, which "will enable suppliers to raise rates in the short term if growing occupancies are sustained." Prices in Sweden and the United Kingdom are expected to grow slightly more than those in Germany.
Meanwhile, airfares in Latin America are expected to rise between 3 percent and 5 percent for intercontinental business class and between 2 percent and 3 percent for short-haul economy. Amex cited a stabilized political environment, economic recovery and growing capacity.
Amex said regional hotel rates also will rise. Brazil would see the largest increase in mid-range rates, 3 percent to 4 percent, while Argentina experiences the largest rate increase among upscale properties, 2 percent to 3 percent. Amex said upward pricing pressure will be influenced by stronger occupancy and more efficient distribution.
North of the border, Amex expects Canadian economy class fares to stay flat or drop slightly, influenced by low-cost competition, while international business class fares increase as much as 5 percent. Amex also expects marginal increases of up to 3 percent in Canadian hotel rates, matching those in the United States.
American Express last month also predicted slight hotel rate and airfare hikes for the domestic U.S. market
(BTN, Sept. 20).It also forecast higher average daily car rental rates in the United States, to 2 percent. Upward pressure from increased demand, more airport arrivals and higher supplier costs should outpace downward pressure from Internet-enabled competition.