NBTA Forecasts 9 Percent Jump In Travel Costs

Companies next year will spend more on corporate travel as rates offered by all types of suppliers--coupled with the overall number of business trips--are expected to grow, according to the National Business Travel Association's 2006 forecast, released today. Based on 130 travel manager respondents, NBTA said that overall travel management costs should jump 9 percent next year.

Hotel rates are forecasted to make the largest jump in 2006, increasing by 9 percent from this year's levels, while corporate airfares are expected to grow 6 percent and rental car rates are pegged for a 5 percent spike.

Of the respondents, only about 4 percent said they will cut back on air travel in the next year, while 50 percent said 2006 will bring more trips and 31 percent said there would be more travelers to manage.

Despite the anticipated airfare increase, "year-to-date airfares have increased marginally," NBTA said. "However, the average fare paid today is still likely to be lower than last year and well below previous years. Average domestic fares are 18 percent below what they were in 2000." Although airfares should grow by 6 percent, NBTA said, "Low-cost carriers will keep prices competitive despite rising operating costs, especially related to fuel."

Meanwhile, the laws of supply and demand continue to dictate lodging industry pricing, as demand continues its upward trajectory in the face of limited room supply growth. "About 73 percent indicated they expected to spend more because room rates were going up, while almost 41 percent indicated that they expected to spend more because more trips would be taken in 2006," NBTA said. "Another 28 percent indicated that more traveling employees would increase their hotel budgets." To temper cost increases, many companies continue to favor midprice properties over their luxury counterparts. Ninety-three percent said the shift to midprice hotels continues.

NBTA cited higher fuel costs, increased pricing pressure from auto manufacturers and the surge in local taxes as primary contributors to an expected 5 percent increase in car rental rates.

In addition to rising travel costs, managers and senior management continually tighten travel policies. Nearly 90 percent of the respondents said they mandate their travel programs, 37 percent said they have enacted a soft mandate and almost 52 percent claim to mandate the entire travel policy.