‘Business travel costs set to rise in 2007’

Air fare, hotel and car rental rates are all forecast to rise in 2007, hiking costs for businesses, a new report warns

The American Express Global Business Travel Forecast suggests international business fare will go up by between 3%-7% while hotel rates in Europe could rise by up to 6%.

A move towards more online bookings and other cost savings such as a reduction in meetings are likely to occur in response to the heightened price of corporate travel.

Amex Business Travel, Advisory Service vice-president and global leader Mike Streit said: “Keeping executives on the road while holding budgets in check will be a challenge for organisations in 2007.

“For instance, as compared to 2006, the Forecast indicates an average domestic North America trip inclusive of air fare, car rental and hotel stay will increase $46 USD or 4.5% in 2007, and an average international trip with its air fare and hotel stay will increase $180 USD or 4.6%.

“We anticipate that more organisations will ramp up their procurement focus, implement new technology tools at the point of booking, update and strengthen their travel policies and focus on traveler behavior to ensure that negotiated savings are fully realised.

“The migration to online booking, already well underway in North America, and the ‘visual guilt’ associated with fare transparency will gain even more momentum as a strategic imperative across other regions of the globe. We also expect to see a growing number of corporations zero in on corporate meetings spending as this area, until now, has been under-examined and is ripe for savings and control opportunities,” he added.

In Europe, upward pricing pressure continues to take hold in most regions, the report said. More passenger traffic and higher oil prices will be offset by continued low-cost carrier growth, increased capacity on high traffic routes and competitive fare structure changes. 

The forecast sees moderate air fare increases of zero to two per cent for economy fares and two to three percent for international fares throughout Europe. More passengers and high fuel costs will be partly offset by low-cost carrier growth and increased capacity.

Air fares are expected to rise a moderate one to three per cent in the UK, France and Sweden. In Germany, the impact of low-cost carriers may push air fares down, and domestic fares may fall by one per cent in 2007.

Hotel costs will increase amid significant business demand and higher occupancy rates. UK rates will rise two to six percent – some cities, such as Edinburgh, will record rate increases as high as 11%.  In London, overall rates will climb two to five per cent in mid-range hotels and three to six per cent in upper-range hotels. Many London hotels will see already-high occupancy levels climb to as much as 80%-90% in 2007.

In Europe, car rental firms will remain much more competitive than in the US. Rates are expected to increase one to three per cent on a year-over-year basis.

Report by Phil Davies