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Industry observers expect business travel volumes to grow further in 2008, leading to ever-more crowded airplanes, congested airports and sold-out hotels. In addition to traveler headaches, next year's high-demand environment also will be characterized by increasing business travel costs, according to recent projections from BCD Travel, Carlson Wagonlit Travel and the National Business Travel Association. Of particular concern to corporate buyers, BCD and CWT predicted that hotel rates would rise by as much as 9 percent and 10 percent, respectively--potentially impacting both transient travel and meeting budgets.
In a preliminary analysis, NBTA predicted that published airfares next year would increase by between 6 percent and 10 percent, and "corporate discounted airfares" would rise between 3 percent and 5 percent. Among 196 travel manager respondents to an NBTA survey, 60 percent said they expected their companies' travelers to make more trips in 2008, compared with this year.
Based on analysis from the CWT Solutions Group, Carlson Wagonlit Travel for 2008 anticipates domestic published fares to increase 4 percent to 7 percent. An expected double-digit jump in published international fares would follow the 15 percent to 20 percent hike in international business class airfares that CWT observed this year versus 2006.
BCD Travel's forecast, developed in conjunction with its consulting arm Advito, includes more modest air travel cost increases, with worldwide published airfares rising 2 percent to 4 percent, below the 6 percent to 10 percent BCD had anticipated for 2007. Corporations in particular would face even smaller price hikes of 2 percent or less--down from the 5 percent to 7 percent range expected this year--as airlines provide deeper corporate discounts for those clients able to shift share, according to the forecast.
Nevertheless, as a result of "high load factors, increasing published fare levels, growing travel demand and stable capacity, corporate travel buyers will need to search harder to find savings opportunities," according to BCD's forecast. The travel management company suggested buyers pursue fixed fares and expand preferred airline programs to obtain "new discounts on travel that was previously purchased at published rates."
BCD also noted that new all-business class carriers would apply greater pricing pressure on some transatlantic routes while low-cost carriers would "provide a check on mainline carriers' ability to raise fares" in a growing number of markets.
Meanwhile, the new European Union-United States "Open Skies" agreement--slated to take effect in March--may result in "fluctuation in airfares on major business routes" as airlines enter markets traditionally served by only a few dominant carriers. "The introduction of more competition will be good news for business travelers," BCD wrote. "Business class fares on routes out of London Heathrow, for example, are likely to fall once Open Skies takes effect."
"Corporations will be able to better use their corporate discounts on international routes served by multiple airlines," added Rose Stratford, senior vice president of industry relations for BCD Travel in the Americas, referring to lifted limits on code sharing among alliance partners.
However, with Open Skies will come the likelihood of "low-cost carriers" entering new markets, which could complicate things for managed travel programs. "While from a price standpoint this may be welcomed, the low-cost carriers traditionally do not participate in global distribution systems," Stratford said. "As a result, we could see more content fragmentation, lower corporate discounts and continued cost pressures among the carriers."
On the lodging front, CWT predicted average daily rates in 2008 would increase 5 percent to 10 percent, year-over-year. On the list of needs for next year, CWT said, are "access to automation to drive request for proposal administration; cost effective outsourcing and benchmarking resources; and new avenues to drive cost savings."
BCD Travel said daily room rates in 2008 would experience an average increase of 6 percent to 9 percent, as demand continues to outpace supply. [This summer, executives from BCD Travel and Advito had said that companies should expect their average hotel room rates to increase 4.5 percent during 2007.] NBTA's projections call for a 3 percent to 7 percent increase in hotel rates.
"Investment plans by all major chains will add significantly more hotel rooms over the next two to five years but relief is not expected until well into 2008," BCD wrote. "Hotels are becoming so sophisticated in their management systems that Advito anticipates rate increases will still occur even if demand drops in some markets."
BCD also cautioned that "traditional negotiation methods may no longer yield the same level of savings," as some hotels continue to turn down higher-volume commitments from clients, preferring instead to keep rates as high as possible.
As a result, BCD offered several pointers, including exploration of bulk-purchase models, consideration of lower-tier hotels, travel pattern shifts to include "Sunday or Monday arrivals and Saturday departures," and a focus on "the total cost of stay."
For example, BCD suggested that companies can save money by first finding the best hotel option and then booking the air portion of the itinerary--reversing the traditional sequence in business traveler bookings. "Lodging costs can be as high as or higher than airfares and the air schedule may limit available hotel and ground options or demand a price premium," according to its report. "Like air schedules and fares, hotel availability and rates can vary dramatically. It is important to consider the cost of the whole trip."
In terms of car rental, both BCD Travel and NBTA expect 2008 rates to rise by 5 percent to 7 percent. BCD said suppliers would "struggle to maintain profitability in the face of rising operating costs," but would also offer buyers such new rental options as hourly rentals, chauffeur service and alternative-fuel cars.
Those planning meetings should expect 2008 costs to jump by 8 percent to 10 percent. "The meetings sector will face many of the same supply and pricing challenges that are seen by the transient travel sector," according to BCD. "Meeting costs per attendee are expected to rise as food costs, fuel surcharges, high airfares and high group rates impact the total cost of the meeting budget in all regions."
To combat those trends, BCD suggested that "a change in meeting pattern--looking at the shoulder season or even low season--is becoming more prevalent." It also said companies should encourage meeting planners to consider "non-prime market (lower-cost) destinations."
Meanwhile, BCD expects U.S.-originating meetings to avoid European destinations, given the weakness of the dollar versus British and European currencies, with the reverse true for Europe-originating meetings.
In addition to maintaining their business travel budgets, companies will be tasked with keeping their travelers on-time, productive and compliant with travel policies. "Traveler frustration is at an all-time high," according to BCD Travel's forecast, citing high airline load factors and hotel occupancies. "The challenging situation will only worsen in 2008."
BCD suggested that "there will be no quick fix to the capacity crunch ... Airports will not be able to expand fast enough to accommodate the projected increase in passenger loads." It also noted that airlines are padding flight times to "compensate for potential delays," a development with implications for class-of-service policies tied to flight duration.
BCD also noted that longer travel times, including security delays, can lead to such ancillary costs as wireless Internet access fees for travelers waiting at airports, and complications related to meeting attendees arriving at their meetings on time. "Because [airline] seats are in short supply," BCD added, "travelers may have to arrive for meetings a day earlier, necessitating a hotel stay." Such measures not only impact budgets but also jeopardize travelers' work-life balance.
Crowded planes may also require a degree of flexibility in terms of considering secondary airports, BCD suggested, while tight hotel supply could force travelers to use unfamiliar or non-preferred properties.
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