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Business travel demand will outpace capacity in 2008 and drive rate increases

Demand for business travel services will again outweigh supply in 2008, driving continued increases in rates across air, hotel, car rental and corporate meetings and events according to the American Express annual Global Business Travel Forecast. While…

Demand for business travel services will again outweigh supply in 2008, driving continued increases in rates across air, hotel, car rental and corporate meetings and events according to the American Express annual Global Business Travel Forecast. While worldwide airfares are expected to continue their climb, hotel rates are projected to experience high double-digit increases in demand-heavy markets across the U.S., Europe and Asia.

“Travel managers and procurement professionals can expect another capacity-restricted, challenging year and a continued push to keep travel and entertainment budgets in check. However, opportunities still exist to further control costs without curtailing business travel,” said Mike Streit, Vice President and Global Leader for American Express Business Travel Advisory Services. “Heading into 2008, successful T&E management strategies will focus not just on controlling travel expenses, but also on identifying additional areas to control costs and save, such as entertainment and related services including corporate meetings and events.”

Global Business Travel Forecast

The Global Business Travel Forecast, prepared by Advisory Services, predicts that the average cost of domestic and international trips will increase.



Streit continued, “In 2008, we expect a domestic trip inclusive of airfare, car rental and hotel stay will increase six percent, or $63 USD, bringing the average trip cost to a total of approximately $1,110 USD. For an international trip, the increase is expected to be nearly seven percent, or approximately $205 USD, bringing the cost of an average trip to $3,171.”

Global Airfare Forecast

Pricing pressures that have influenced the rise in airfares in the past are expected to continue in 2008, but more competition in certain markets should help ease increases.

  • Fuel costs, improvements in airline inventory and pricing technology, capacity constraint and demand for long-haul are likely to drive price increases.
  • We anticipate that greater competition through the USA-EU Open Skies Accord, growth of low-fare pricing models and more efficient aircraft will temper increases.

Global Hotel Rate/Meetings Spend Forecast

Hoteliers around the world will continue to benefit from their market position in 2008.

  • High demand and slow growth of supply is likely to force prices up and will impact access hoteliers give to last room availability rates. Companies may also encounter minimum and maximum stay requirements and instances when corporate rates do not apply.
  • Continued infusion of capital to hotels should benefit travelers through renovations and upgrades of properties and additional amenities, particularly in lower market tiers. However, these improvements will force hotels to maintain rates at historic highs.
  • Rising hotel rates are likely to contribute to the expected increase of 8% -10% percent in global meeting spend (guestrooms account for nearly half of all meeting spend, excluding airfare).
  • Focusing on meetings as an area of savings will help drive down T&E expenses.

Regional Highlights

North America – Air/Hotel/Car Forecast and Trends

The Forecast shows that in North America prices are expected to increase across transient segments, although it is expected to be 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 US cities) include:

    • 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:

    • Air: Low-fare airlines, stronger policy compliance, increased competition from the USA-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.

Europe – Air/Hotel/Car Forecast and Trends


  • Pressures which may lead to increases in 2008 include:

    • Air: Strong demand, particularly to Transatlantic, Far East, and South Asia
    • Hotel: High occupancy (exceeding 80 percent in London).
  • Factors which could soften increases include:

    • Air: Competition between air and high-speed rail and low fare penetration.
    • Car: Highly competitive market.

Latin America & the Caribbean (LAC) – Air/Hotel/Car Forecast and Trends


  • Rate increases can be attributed partially to:

    • Air: Strong demand from economic growth and high oil prices.
    • Hotel: Low supply and high demand for majority of the year.
  • Several forces may deflate rate increases including:

    • Air: Increased capacity, the growth of low-cost airlines and fare matching strategies by incumbent airlines.
    • Hotel: New mid-range properties are expected to be added by the end of 2008.
    • Car: More competition for travelers’ business.

Asia-Pacific (JAPA) – Air/Hotel/Car Forecast and Trends


  • The summer Olympics in Beijing is expected to drive up prices along with economic growth, an increasingly mobile population and:

    • Air: High cost of fuel, aircraft upgrades, soaring demand, consolidation.
    • Hotel: Real estate and construction costs (slower growth in supply than demand), competition between leisure and business travelers.
  • Downward pricing pressures include:

    • Air: Growth of low-fare airlines and airlines are expected to focus on building market share over profitability in the shorter term.

Other 2008 Trends to Watch

Compliance & Change Management Strategies

  • To handle increasing costs, companies should consider building travel program compliance through subtle change management techniques including seeking greater high-level executive involvement in policy implementation and clearly communicating policy details.
  • Change management will likely focus on changing behavior in 5 key areas:

    • Lowering use of refundable airfares
    • Optimizing use of advance purchase fares
    • Defining more narrowly when first/business class fares can be used
    • Driving online bookings
    • Improving use of preferred suppliers, especially hotels where compliance has historically hovered around 50%
  • Out of policy monitoring tools are expected to be implemented more widely generating greater policy compliance. We anticipate a 15 percent to 20 percent increase in sales of tracking/monitoring tools could be achieved.

Eco Initiatives Evolve into “Responsible Business Travel”

  • Companies are expected to increase the focus on responsible business travel practices related to the environment and the safety and security of travelers.
  • Companies are expected to increasingly focus on understanding and measuring a trip’s “carbon footprint.”
  • Although carbon offsetting remains popular, we think that this is likely to prove to be a short-term solution that will be combined with policy and program management strategies.

Online Penetration Expected to Increase


  • We have seen procurement and emerging technologies drive usage of online booking tools, with 51 percent of American Express Business Travel clients in the US booking transactions online.
  • In our experience, travel counselors are increasingly booking the complicated and multi-part trips while companies are taking advantage of online solutions for more simple itineraries.

All ranges represent forecasted year-over-year increases.

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