Amex: 2010 European Long-Haul Costs To Soar, Short-Haul To Stay Flat

European business travel buyers can expect a relatively stable pricing environment domestically in 2010, but whatever cost savings they yield on shorter journeys will be offset by the double-digit percentage-point increase for international trips anticipated by American Express Business Travel in its 2010 Global Business Travel Forecast, which the company released today.

The average domestic cost per trip in Europe will be relatively stable compared with 2009 as Amex projects just a €1 increase to €1,066. Meanwhile, the average cost per trip of an international journey will be markedly more expensive in 2010 as Amex predicts an average 16.2 percent increase to €2,467, €34 over 2009 costs.

Compared with 2009 fares, European domestic and short-haul economy airfares will remain flat or increase by as much as 2 percent next year, and international and long-haul business fares will rise 5 percent to 7 percent, according to the forecast. Domestic and short-haul economy fare expectations in France, Germany and the United Kingdom also all fall in that range. International and long-haul business fares will rise 4 percent to 6 percent in France, 6 percent to 8 percent in Germany and 5 percent to 7 percent in the United Kingdom, according to Amex.

"The increase in fares will happen gradually through the course of the year," said Joakim Johansson, vice president of Amex global advisory services in Europe, the Middle East and Africa. "Rates will remain flat or even go down at the beginning of 2010, but as the economy hopefully picks back up, you will see airline fares go up across the markets in Europe."

Those gradual increases will come as airlines adjust capacity and lean more on business travelers returning to the skies, especially those who are downgrading from business class. "Airlines are likely to discount their new premium economy product, which creates better prices for travelers, but it is still premium economy, which is more expensive than the traditional economy product, so the average paid fare will go up," Johansson said.

Hotel average daily rates are anticipated to remain relatively stable year over year. Amex forecasts ADR at mid-tier properties could shift by as much as a 2 percent decrease up to a 2.5 percent increase. Upper-tier ADR is expected to fall within a 2.5 percent decrease to a 2 percent increase range.

French mid- and upper-tier average daily rates are expected to remain flat or increase by as much as 3 percent. German hotel ADR could increase by up to 3 percent or have slight decreases by as much as a half of a percentage point.
Amex expects U.K. mid-tier property room rate to decrease of as much as 3 percent up to 4 percent increases. U.K. upper-tier hotel ADR could drop by as much as 4 percent or increase as high as 2.5 percent.

Rate decreases experienced in the first half of the year are likely to disappear toward the back half of 2010. In addition, Johansson said that as the economy stimulates, hotels will start to withdraw promotional fares and this negotiating season could start protecting their rate integrity, which has been greatly reduced in 2009.

Amex anticipates global car rental rates to remain relatively stable with price changes from a decrease of 1 percent to an increase of 2 percent.