American Express Projects Higher 2008 Travel Costs

Business travel costs are expected to increase worldwide in 2008, though some U.S. expenditures generally will rise at a slower pace than they have in previous years, according to American Express' 2008 Global Business Travel Forecast, released today.

The average cost of a domestic trip—encompassing air, car and hotel—will increase 6 percent to $1,110, said Mike Streit, vice president and global leader for American Express Business Travel Global Advisory Services. An international trip is expected to see a sharper increase of $205, to an average of $3,171 per trip.

According to Amex, projected domestic economy class airfares are expected to rise between 1 percent and 5 percent and international business-class airfares between 5 percent and 10 percent in 2008. Europe is expected to see similar increases. Amex's projections are based on a blend of projected published and corporate fares from clients, said Mitch Cwanger, air practice leader for American Express Business Travel Global Advisory Services.

Amex forecasts moderate hotel rate increases in North America, including mid-range increases of 4 percent to 7 percent and upper-range hikes between 5 percent and 8 percent in 2008.

Internationally, hotel demand continues to far outweigh supply, especially in India, where Amex forecasts 34 percent to 38 percent mid-range hotel increases and up to 41 percent for the upper range. Overall, Amex expects global hotel rates to increase by 11 percent to 14 percent. The Japan, Asia/Pacific and Australia region is expected to have an 18 percent to 22 percent increase. Europe is expected to have hotel rate increases of 12 percent to 14 percent, with the United Kingdom fueling that margin with more than 20 percent average increase.

Meetings also will be affected by the increase in room rates, continuing the current seller's market. Amex said its clients spent 34 percent more per meeting in the first half of 2007 from full-year 2006 levels, which includes a 10 percent increase in guest room rates.

"The high cost of guest rooms will directly impact corporate meeting and event planners," said Chris Wilkes, meetings management advisory services practice leader. "Hotel rooms are now representing nearly half of all meetings spending, exclusive of air." Traveling for longer periods of time and an increase in meeting attendees also contributed to the increase in costs, she said.

Amex also reported a shift in North America and Europe toward consolidating meetings spending. "Some costs in meetings are also shifting under a procurement-minded umbrella," Wilkes said. However, "companies for the most part are still not fully managing their meetings," she said. Smaller meetings are increasingly coming under scrutiny to drive savings.

Amex expects car rental rates in North America to increase by 2 percent to 4 percent and by 1 percent to 3 percent outside of North America.