BCD, Amex Issue Forecasts That Differ Over Air

Citing strong demand in all business travel markets, both BCD Travel Consulting and American Express Business Travel have released reports detailing a rise in corporate travel client spending in 2006.

The forecast BCD released to clients late last week, however, was a little less upbeat than the one issued by American Express earlier in the week. Radnor, Pa.-based Business Travel Coalition chairman Kevin Mitchell took issue with the American Express predictions in a press statement.

American Express' Business Travel Monitor, which tracks a variety of travel expense categories booked by American Express Business Travel clients, showed that domestic airfares have risen to their highest level since the end of 2001, with average ticket price at $247 for a one-way trip, up 13 percent from last year. Meanwhile, across the Monitor's 160 international routes for the second quarter, average international airfare grew 6 percent to $1,709. These rising costs are a clear indication that U.S.-based airlines have regained their pricing power, Amex said.

As long as a vast majority of business travelers on the 329 routes Amex surveyed are purchasing business-type fares, then the survey is a useful proxy for purchased business airfares around the country, said Mitchell in a statement."However, if the percentage of travelers purchasing business-type fares falls dramatically," Mitchell said, "which is what has happened in the past several years, then the survey results are less useful at best, and can be alarming and misleading at worst."

"In reality, for many corporations, average fares paid over a comparable period have risen in the low single digits only and some companies have seen their average fares paid actually fall," he continued.

Mitchell cited data from AirlineForecasts that found high-yield business traveler traffic is approximately 50 percent of that prior to 2001. "In other words, business travelers are purchasing all manner of leisure-type fares, rendering the level of paid business-type fares an interesting but not very meaningful statistic," according to Mitchell.

AirlineForecasts' data on oil markets and jet fuel prices estimated jet fuel costs to average approximately $1.80 per gallon next year, less than the $2.20 on which most analysts are basing predictions, Mitchell noted. "This will provide approximately $6.5billion in cost relief for the 12 major airlines, much of which will be transferred to the consumer in the form of lower fares," Mitchell said. Even so, the major airlines may use the fuel-price relief to compete with low-cost carriers, Mitchell said.

BCD Travel's 2007 Industry Forecast seems to agree with the Business Travel Coalition airline outlook. With data gathered from client bookings and procurement projects, BCD estimated airfares would increase 7 percent to 11 percent in 2007. Yet, despite rising ticket prices, carriers will have to fight to sustain profitability, BCD Travel said. "Airfares remain below profit level as low-cost carriers continue to compete with the legacy carriers in all markets," the BCD report noted. "In Europe alone, low-cost carriers captured 16.3 percent of the market."

BCD predicted daily hotel rates would average a 6 percent increase, with some markets rising as much as 10 percent to 14 percent. BCD predicted rates would continue to climb until capacity can catch up to supply in 2008.

Amex's second-quarter Business Travel Monitor reported hikes in U.S. and international booked hotel rates, with domestic rates rising 3 percent to $139 and international rates rising 11 percent to $237.

American Express Business Travel clients saw car rental costs rise 4 percent to $67.26, compared with second quarter of 2005. BCD estimated car rental costs would rise 5 percent to 7 percent. Even with such rates on the rise, uncontrollable taxes and the high cost of fuel will be passed to customers, BCD said.

"In the United States, additional fees, such as no-show charges of $50, are beginning to become a standard part of the car rental industry, much like the hotel industry's stricter no-show policies implemented four years ago," the report said. "A trending of add-on charges, such as a loss damage waiver in the rental car rate, will force buyers to increasingly review these charges for inclusion in the negotiated daily rental rate."