CWT Forecasts Most Business Travel Prices To Rise Next Year

Corporate travel prices next year will increase in most supplier categories, Carlson Wagonlit Travel said in its annual forecast released on Tuesday, with U.S. hotel rates projected to grow as much as 7.4 percent and domestic economy airfares slated for hikes of up to 5 percent.

The mega travel management company said higher demand, sustained capacity discipline and anticipated increases in fuel costs would combine next year to put further upward pressure on airfares, which have continued to firm from the lows of the past year. Domestic economy airfares likely would grow between 3 percent and 5 percent in 2011, while CWT expects international economy and business class tickets also to increase between 3 percent and 5 percent.

The only air category in which CWT expects to witness a decline is in the front of the plane on domestic trips, with fares to decline next year between 2 percent and 7 percent, CWT said, noting that "a big decrease in front-cabin volume in 2008/2009 caused these prices to spike, as price sensitive customers dropped out of the market."

CWT expects hotel pricing to swing upward next year, with average daily rate to grow in the United States between 6.4 percent and 7.4 percent. Rate growth will be particularly strong in the Northeast, where the travel management company said rates would grow in excess of 12 percent.

"To date, many travel buyers are seeing slight upturns in hotel transactions, while rates remain favorably low," CWT said. "These low rates have enticed many companies to invest more dollars in travel." CWT, meanwhile, expects Canadian hotel rates next year to grow between 4.7 percent and 5.4 percent.

CWT forecasts corporate car rental rate changes next year will be moderate, decreasing by no more than 2 percent (see correction). Chauffeured transportation services, meanwhile, will see price declines between 3 percent and 5 percent, as rail travel in North America is likely to grow between 4 percent and 7 percent.

"The ground transportation industry has indeed been hard hit by the weakened economy over the past two years," CWT said. "Along with demand management issues in business travel more broadly, fleet inventory issues, fuel prices and car maker crises have created a 'perfect storm' for ground transportation suppliers. To compensate, the industry as a whole has been busy right-sizing and, for the most part, the worst seems to have passed."

Meanwhile, CWT said that the per-attendee, per-day cost for corporate meetings would increase between 7 percent and 11 percent.

"As corporate revenues and profitability began to improve in the first half of 2010, M&E spend trended in a similar direction. This is expected to continue into 2011 and beyond. The market is likely to return to historical activity levels over the next one to four years, depending upon the region of the world," CWT said, with the Middle East returning to 2008 levels by the end of this year, Asia/Pacific recovering by the end of 2011, and Europe and North America lagging on the recovery front until 2012 at the earliest and 2014 at the latest.

CWT North America president Jack O'Neill said that during the first six months of this year the travel management company handled more than 13 percent more transactions than in the same period in 2009.

"These numbers reflect an improving picture for the economy around the globe and, depending on our clients' sector of business, a trend toward 'back to normal,' " he said in a letter to clients, noting that "business travel has not yet returned to pre-recessionary levels and it remains to be seen whether it ever will."

CWT said the consensus is toward slow economic recovery, with spending on travel not likely to reach 2008 levels until the second quarter next year.