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American Express Business Travel's report on business travel in 2009 offers wide variances on cost expectations but forecasts overall total trip costs (air, hotel and car rental) globally to increase 2.8 percent year over year (to $1,139) for domestic trips and 4.3 percent (to $3,556) for international trips.
Unlike some others in the travel management field, Amex said it sees possible airfare declines in 2009, given challenging economic conditions, tighter corporate controls on business travel and the substantial jump in airfares during 2008. On the other hand, the company pointed to capacity cuts, ticketing restrictions, potential industry consolidation "and tighter controls over contract performance measurement" as drivers of upward pressure on airfares.
Average hotel rates, according to the Amex report issued this month, will rise but not as much as in years past, as occupancy levels fall. Rate growth or decline, the company noted, will vary greatly by market, depending on supply and demand trends.
Meanwhile, average car rental prices also are expected to inch up slightly, despite higher fleet costs, as rental firms compete vigorously for corporate accounts, Amex explained.
"We'll see the halt of the steady upward climb in travel costs that we have seen in recent years, which, of course, presents good opportunities for travel buyers to realize savings," said vice president and general manager for Amex's Global Advisory Services and Meetings Solutions Hervé Sedky. "We expect the economy to not recover until 2010. We do expect business travel to be weaker in 2009."
That weakness, he said, would be driven generally by an unfavorable economy and continued corporate mergers and acquisitions. "Senior management increasingly is scrutinizing this spend category and really looking at travel as an investment," Sedky explained. "The biggest opportunities organizations have today are around demand management, behavior and compliance." Simply stated, that means fewer nonrevenue producing and nonessential business trips and meetings.
Amex officials also said organizations should carefully monitor other travel-related costs, including transportation to and from airports, airport parking, meals, shipping and webconferencing. These costs, on average, can total "$400 per trip," Sedky said, "but in some corporations they can actually double the cost of a trip." Other extra costs not factored directly into the Amex forecast are ancillary airline fees, like charges for checked baggage, which, according to company officials, can add 15 percent to the cost of an airline ticket and possibly 2 percent to 3 percent to total travel program costs.
The American Express Business Travel forecast, delayed nearly a month to "reassess the financial market activity," followed those issued earlier this month by BCD Travel consulting arm Advitoand last month by Carlson Wagonlit Travel.
For global airfares, Amex predicted a year-over-year change of between a 1 percent decrease and a 6 percent increase for domestic, short-haul, economy ticket prices. CWT forecast an 8 percent to 12 percent increase for domestic U.S. 2009 airfares. For international, long-haul, business fares, Amex predicted a 2 percent to 7 percent increase. CWT expects an international fare jump of 16 percent to 20 percent. Overall, Advito said 2009 average airfares would increase between 6 percent and 8 percent.
In terms of global hotel rates, Amex predicted a change of between a 1 percent decrease and a 6 percent increase. CWT projected an increase of 2 percent to 3 percent, and Advito's forecast anticipated a 4 percent to 8 percent increase.
Amex predicted that the Japan, Asia Pacific and Australia region would have the largest increase in total trip costs: 5.6 percent for both domestic and international itineraries. Regional hotel rates are expected to rise as much as 12 percent for midrange properties and 13 percent for upper-range properties "as demand continues to outstrip supply, and the regional economy holds fast against the global storm." China may see some of the larger price hikes of up to 8 percent for domestic economy airfares and up to 10 percent for international business class airfares--as well as double-digit percentage jumps in hotel rates. On the other end of the spectrum, Amex predicted that domestic airfares in India may decline as much as 3 percent, while Japanese hotel rates are expected to rise only a few percentage points.
In North America, "there is a good likelihood we'll see a reduction in domestic economy fares," according to North America vice president of Global Advisory Services Frank Schnur. Amex predicted that domestic economy fares could shrink by as much as 3 percent year over year or grow as much as 5 percent, while long-haul, business-class fares would increase between 1 percent and 6 percent.
Midrange hotel rates in North America, Amex said, could decline slightly or increase as much as 6 percent. Upper-range hotel rates could drop as much as 2 percent or rise by more than 4 percent. Airline capacity cuts, particularly in smaller markets, "will have an impact" on hotel demand, Schnur said. In such larger markets as Chicago, Los Angeles, New York, San Francisco and Washington, D.C., rate increases likely will be more pronounced, "but not like years past, where rates were going up significantly, double digits in some cases," Schnur said.
In Europe, Amex projected total trip costs (air, hotel, car rental) would rise nearly 3 percent for domestic itineraries and 5 percent for international ones. While short-haul economy fares could rise by 4 percent year over year and long-haul business fares by as much 9 percent, "there potentially will be higher airfare increases on long-haul routes to Asian destinations, where business demand is still strong," said Joakim Johansson, EMEA vice president of Global Advisory Services.
For hotels, Johansson said there will be "continued strong demand in cities with prominent oil and natural gas sectors or gateway cities linked to these sectors," including Moscow; Aberdeen, Scotland; and Oslo, Norway. But just as with air traffic, slowing demand would apply downward hotel pricing pressure "in places, such as London and Frankfurt, that have exposure to the financial sector." He noted that "many" European organizations are "shifting from upper-range hotels to midrange hotels."
In Latin America, airfares are expected to rise by a few percentage points, with larger increases in Argentina and Brazil. Brazil also is expected to show the region's largest jump in average hotel rates, by as much as 9 percent. Schnur noted that "many" Latin American companies are "using demand management practices, like requiring one-day trips."
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