Travel buyers face tough year, warn Amex
Rising air fares and hotel rates across Europe, North America and Asia will lead to some of the most challenging conditions for corporate travel buyers in years, a report by American Express Business Travel has warned.
As the business travel environment picks up and demand exceeds supply, published short haul air fares in the UK will rise between 3% and 5% with long haul business class fares climbing between 5% and 7%.
Mid range hotels meanwhile will increase by up to 4% and upper range by 5% although London rates could rise by up to 15%, the report said.
“It is clear that the outlook for 2006 will challenge the most experienced procurement managers,” said Amex director of global consulting Matthew Davis.
In addition to rising demand from corporate travellers, Amex said the price hikes will reflect the “intense pressure” faced by airlines and hotel groups to recover losses and soften the impact of escalating oil costs.
The study revealed that airlines in North America will increase long haul business class fares next year by up to 6% and domestic and short haul fares by up to 8%. In Europe the fares will rise up to 6% and 4% respectively and in Asia Pacific up to 4% and 3%.
“Many traditional airlines [in North America] have adopted the low cost carrier business model,” said Davis. “However, with the ever-increasing price of oil, many airlines could be forced to increase fares.”
In Europe however, he said the “still burgeoning compeition from low cost carriers” could depress short haul yields.
On the hotel front, the corporate negotiation environment is expected to be “more challenging than in recent years.”
“Yesterday’s good rate may be unobtainable tomorrow leading to unpredictable hotel costs and, occasionally, an inability to obtain a suitable room,” said Davis. “Unless a company locks in a negotiated rate with ‘last room availability’, prices will likely rise in proportion to occupancy levels in a given city.”
According to the report, mid and upper range properties will rise up to 3% and 4% in Europe, up to 3% and 5% in North America and up to 4% and 6% in Asia Pacific.
The increases, which could be tempered in Asia Pacific because of avian bird flu, will be driven by increased demand, limited supply, consolidation and a shift towards a more dynamic pricing model.
Report by Steve Jones
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