In separate business travel forecasts for 2004, the National Business Travel Association, American Express and Eclipse Advisors predicted an uptick in corporate travel and, for the most part, its corresponding costs. Although the reports paint conflicting pictures as to the degree of which travel costs will fluctuate, they point to signs of recovery in the general economy and the industry, as cautious optimism prevails.
"Generally, business travel volumes hold on par with the overall economic climate, which means 2004 promises a slight recovery in spending and volumes," NBTA stated, echoing a common sentiment among the forecast reports.
However, the commonality largely stops there. The American Express Global Business Travel Trends and Forecast for 2003-2004 stated that U.S. economy class domestic fares would rise under 2 percent next year, differing from projections developed by Eclipse Advisors and NBTA
(see story).Meanwhile, American Express Global Consulting Services director Matthew Davis made his predictions earlier this month at an Amex press forum in Cannes, France, against a background of the International Civil Aviation Organization forecasting passenger traffic to grow 4.4 percent in 2004 and 6.9 percent in 2005 after zero growth in 2003.
Hotel rate increases will be pegged back a little more severely as occupancy is expected to make a humble rebound. While Amex predicted rates will grow no more than 1 percent in the United States, NBTA forecast a 3 percent overall increase. Although Eclipse said published corporate hotel rates would increase between 1 percent and 3 percent, negotiated room rate changes will decrease by 1 percent to 4 percent in 2004.
Amex expects hotel rate fluctuation in Europe to match that in the U.S. next year, as rates in Asia/Pacific will increase somewhere between 1 percent and 3 percent. Forecasting an increase of up to 5 percent in published corporate rates in Europe, Eclipse predicted that "sagging economies in continental Europe will keep discounting high enough for companies to see drops in actual rates paid." It estimated those "drops" could be as high as 5 percent.
With the hotel market expected to remain soft worldwide, Davis recommended that corporate travel buyers act now to keep their costs down. "This is a good opportunity to lock in rates for 2004," he said. Eclipse and NBTA agreed.
"As in 2003, corporations are capitalizing on oversupply in markets and demanding increased discount levels for constant, or slightly increased, corporate room night commitments," Eclipse stated in its report. NBTA expects occupancy to increase 1 percent to 2 percent among the midprice brands but remain low for luxury hotels due to flat demand.
NBTA also predicted that car rental rates will increase by 2 percent and travel management company costs will rise 6 percent. Eclipse Advisors expected a 2 percent to 5 percent increase in published corporate car rental rates but a 2 percent decrease in rates paid.
However, a presentation by Kevin Grice, senior economist with American Express Bank in London, suggested that, despite good news about supplier prices, buyers should budget for an overall increase in travel expenditures during the next year. Grice anticipated significant global economic growth, including an increase in U.S. gross domestic product of 4 percent to 5 percent. The implication is that companies will find it necessary to travel more in 2004. U.S. buyers also should be aware that Grice tips the U.S. dollar to weaken in an attempt to attract additional investment inflow. The downward adjustment of the dollar, especially against the euro and pound sterling, will increase traveler expenses incurred within Europe.
American Express Global Travel Services president Charles Petruccelli told the forum that from a supplier point of view, "2003 has been even worse than 2002. I don't believe we are out of the woods yet. Bouncing back to the levels of 2000 is not realizable. We should not look to it as a benchmark but as an all-time high. The benchmark should be where we are now."
However, the industry may never return to pre-Sept. 11 levels. "Travel departments have been adjusting to tougher economic conditions and security concerns during the past few years," said NBTA president and CEO Carol Devine. "As we move into 2004, NBTA predicts the beginning of a recovery in business travel. Yet, corporations will still be focused on the bottom-line, and the cost-consciousness of the past two years will remain." Highlighting the emergence of a more cost-conscious travel buyer is the increased use of both low-cost carriers and midprice hotels. According to NBTA, 83 percent of corporate travel management members said they are increasingly likely to opt for midprice hotels, while more than 80 percent of NBTA members now use low-cost airlines, which is an historic high.
In fact, Amex estimated that such carriers now have a 20 percent share of the U.S. market. The trend has had even more penetration in Europe, where the lower-cost carriers hold nearly 29 percent of the market, "a substantial increase on the 13.6 percent share held in 2002," according to Amex.
~Amon Cohen contributed to this article.