Gap widens between Business and Economy fares

The gap between Business Class and Economy fares has widened, according to the latest American Express Business Travel Monitor Europe.

Year on year, the average Business Class fares paid by Amex’s UK corporate clients rose 1.3% at the high end, while low end fares fell steeply by 19.5%.

Economy Class high end fares fell 11.7%, but the lower end fares fell by as much as 19.7%.

This widening trend was also seen in Business Class fares paid in other EMEA countries, but it was not as pronounced as in the UK.

“As business travellers scale back on the number of trips taken, coupled with tightened corporate travel policies, a downward pressure has been placed on both Business and Economy fares, but this is more pronounced in Economy classes,” said Joakim Johansson, vice president advisory services for Amex EMEA.

“At the top end of the scale, in high end Business and Economy classes, airlines have managed to contain the declines, and even increase fares on some routes.

“We continue to see business travellers changing their habits and choosing Economy travel where possible rather than Business Class, enabling companies to retain travel vital to the success of their business while cutting costs.”

Meanwhile, Amex reported that the European hotel industry is finally showing signs of recovery after several quarters of rate decreases.

Average Daily Rates have increased in 24 out of the 49 European cities tracked, many of those with direct exposure to the oil industry including Moscow and Abu Dhabi.

In addition, both London (City and Heathrow airports) and Frankfurt have experienced some recovery following the decreases in Q2 of 2008, a result of the downward spiral in the financial industry.

Rates continued to fall in parts of Germany with significant manufacturing industry, for example Dusseldorf, Stuttgart, Munich and Cologne.

In Spain the economic downturn is still heavily affecting business activity and travel in Madrid and Barcelona.

But most cities continuing to show a decrease showed a slower rate of reduction compared to Q1.

“We believe the start of recovery in the hotel industry is a direct result of the industry’s proactive response to balancing supply and demand,” said Karen Penney, vice president business solutions, American Express Global Commercial Card.

“For example, many hotel chains have shut down floors, closed marginally profitable hotels, put a stop on new builds and postponed openings.

“Overall we expect the slowdown in hotel rate reductions to continue through Q3, with the first significant rises expected in Q4.

“The hotel market is still a buyer’s market; however this window of opportunity may be closing. We urge travel buyers to take advantage of the current market conditions for 2010 rates while they can.”

By Bev Fearis