Business Travel Demand to Outpace Capacity, Drive Up Rates in 2008

Demand for business travel services will again outweigh supply in 2008, continuing to drive increases in rates for air travel, hotels, car rental and corporate meetings and events, according to (pdf) the American Express annual Global Business Travel Forecast, writes MarketingCharts.

Hotel rates, in particular, will soar with double-digit increases in demand-heavy markets across the U.S., Europe and Asia, according to (pdf) the forecast, prepared by Advisory Services.

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Shortcuts to tables referenced in this article:

1. Global - 2008 Forecast Increases
2. North America - 2008 Forecast Increases
3. Online Penetration by Region

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“In 2008, we expect a domestic trip inclusive of airfare, car rental and hotel stay will increase 6 percent, or $63, bringing the average trip cost to a total of approximately $1,110,” said Mike Streit, vice-president and global leader for American Express Business Travel Advisory Services.” For an international trip, the increase is expected to be nearly 7 percent, or approximately $205, bringing the cost of an average trip to $3,171.”

Other findings from the study follow:

North America - Air/Hotel/Car Forecast and Trends

The Forecast projects that in North America prices will increase across transient segments, although at a slower pace due to anticipated slowing growth in business travel.

• Forces driving prices up (as much as 14 percent for hotels in key U.S. cities) include these:
  • Air: More sophisticated airline pricing technology and premium prices for certain seats such as flat beds, seats with more legroom and seat location within a cabin
  • Hotel: Demand still outpaces supply in key markets; hotels have improved yield-management practices to maximize profits.
  • Car: Pressure from taxes and fees add to overall cost of rentals.
• Pressures that should help mitigate price increases include these:
  • Air: Low-fare airlines, stronger policy compliance, increased competition from the U.S.A-EU Open Skies Accord and increased Canadian flight pass products and web-based tools
  • Hotel: Occupancy remains near flat as a result of newly added supply in some markets

Online Penetration Expected to Increase

• Procurement and emerging technologies drive usage of online booking tools, with 51 percent of American Express Business Travel clients in the U.S. booking transactions online.
• Travel counselors are increasingly booking the complicated and multi-part trips while companies are taking advantage of online solutions for more simple itineraries.

MarketingCharts has more regional forecasts (Europe, Latin America & Caribbean, and Asia-Pacific).