TRAVEL NEWS
News and Informations for the Travel Manager
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Travel News
| Amex Sees Higher '07 Travel Costs |
13.11.2006 |
| With rising prices in air, hotel and car rental spending forecasted for 2007, the cost of a domestic trip that includes all three components will increase approximately $46, or 4.5 percent, while a trip taken internationally will increase $180, or 4.6 percent, from 2006, American Express Business Travel said in its industry forecast for 2007, released late last month. Meanwhile, the travel and card services company saw a third-quarter earnings rise, showing a gain of more than two million cardholders, double-digit percentage T&E spending growth and continued business travel restructuring. Overall, the quarter yielded an 11 percent income hike from continuing operations over the previous year.
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In analyzing the forecast data compiled from statistics, supplier markets, economic trends and interviews with consultants from the company's Advisory Services unit, Mike Streit, the unit's vice president and global leader, said keeping budgets in check in 2007 will be a challenge for many corporate travel buyers.
American Express predicted in its global air forecast a 3 percent to 5 percent increase for domestic short-haul economy fares and a 3 percent to 7 percent increase on international long-haul business fares in 2007. Reduced capacity and potential industry consolidation should outweigh weaker demand and the presence of low-cost carriers and lead to higher domestic fares, the report said.
"We're anticipating demand will be on par with what it's been in 2006. We know that the domestic U.S. airlines continue to cut back capacity and expand international. So it's all supply and demand," said American Express Advisory Services senior practice leader for air Mitch Cwanger. "Even if demand stays the same, if supply goes down that means prices are going to go up. At the same time, companies realizing this are going to look more internally. They need to keep their budgets in line. Therefore, you're not going to be able to negotiate much better deals, unless you have major changes in citypairs or your travel program in general."
To minimize price increases, Streit recommended focusing on policy compliance and tighter controls, and increasing online adoption and enforcing that bookings be made more than seven days in advance.
"The best way to cut back on expenses is to look internally—changing the way travelers behave," Cwanger added. "This means helping them and educating them to buy further in advance, getting them to book online—the visual guilt factor leads to buying the lower fare ticket."
Predicted hotel rate increases across the board were much in line with other analysts' estimates. Priscilla Campbell, American Express' practice leader for hotels and advisory services, said North American prices would increase from 2 percent to 6 percent in the midprice tiers and from 3 percent to 8 percent in the upper tiers. High-demand cities such as New York could rise as much as 18 percent, she said.
Rates also will climb in global markets, particularly in the Asia/Pacific region, which could see increases as high as 25 percent, Streit said. This will mean tougher negotiating for travel buyers.
"The hotel industry across the globe will remain a seller's market," Streit said. "In general, in 2007, corporate discounts will be increasingly difficult to secure."
Car rental rates also are expected to rise by 4 percent to 6 percent in North America, said David Balfour, American Express' practice leader for car rental and advisory services. The increase will stem from a slight reduction in supply and an increase in fleet costs, which account for about 40 percent of costs for car rental companies, he said. International rates will remain much more competitive, rising only between 1 percent and 3 percent, he said. |
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