Amex Predicts Rise In U.S. Rates, Fares Toward 2010's End

Business travel prices will continue to decrease or remain stable in the first half of 2010, but could rise in the back half as suppliers remove discount programs and raise fares and average daily rates in line with a gradually improving economy, according to the American Express Business Travel 2010 Global Business Travel Forecast, which the company released today.

Amex forecasts the average cost of a North American domestic business trip, which includes air, ground transportation and hotel accommodations, to remain nearly the same as in 2009, with just a $5 decrease in cost per trip to $1,108. North America-originating international trips will increase by an average of 3.5 percent to $3,413.

Amex predicts domestic and short-haul economy fares to increase 2 percent to 7 percent and international and long-haul business fares to rise 3 percent to 8 percent in 2010 compared with 2009 levels. Much of the airlines' ability to raise prices in 2010, despite demand drops, will come from their moves to drastically reduce capacity this year.

"As demand increases over the course of the year, they can increase capacity gradually, and that will allow them to continue to have more of an influence on pricing," said Amex vice president of global advisory services Frank Schnur.

U.S. average daily mid-tier hotel rates are expected to fall 1 percent to 4 percent, and 3 percent to 6 percent at upper-tier properties. Hotels in several top U.S. business travel destinations also will suffer ADR losses, according to Amex. New York's average daily rate is expected to remain flat or decrease by as much as 2 percent for mid-tier properties. Upper-range New York hotel rates will drop from 1 percent to 4 percent. Rates in Boston, Chicago, Philadelphia and San Francisco also are expected to fall by as much as 5 percent.

"Airlines were able to reduce their capacity where it was much more difficult for hotels to do that," Schnur said. "Hotels are still in a situation where they have excess capacity and therefore you will see a continuing trend of declining rates."

Amex anticipates global car rental rates to remain relatively stable, with prices between 1 percent lower to 2 percent higher than they are in 2009.