Strategy

Business Travel to Cost More in 2007

Keeping executives on the road while holding budgets in check will be a challenge in 2007, says a new study.
Stephen TaubOctober 26, 2006

The cost of business travel will increase across the board in 2007 as a result of continuing demand without a commensurate increase in supply, according to the latest American Express Global Business Travel Forecast.

The average domestic North America trip inclusive of air fare, car rental, and hotel stay is expected to increase by 4.5 percent next year, while the cost of an average international trip with its air fare and hotel stay will increase by 4.6 percent, according to the report.

The report authors elaborated that air fares worldwide are expected to increase, but at a slower pace than in 2006. Amex estimates a 3 percent to 5 percent increase in global domestic economy fares, and a 3 percent to 7 percent rise in global international business-class fares. “Moderate airfare increases are expected as airlines pare back fare hikes, corporations focus on smarter buying and traveler security remains an area of concern,” said the report.

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Regarding hotel rates, prices will remain at “heightened 2006 levels” and surge in key business centers, Amex notes. Specifically, Amex expects 2 percent to 6 percent hikes in mid-range properties throughout most of the world, and as much as 25 percent increases in the Asia-Pacific region. Among upper-range properties, the report forecasts 3 percent to 8 percent increases throughout most of the world, including North America, and as much as 25 percent rises in Asia-Pacific.

“Skyrocketing demand for hotels across all regions will continue to give hoteliers more control over negotiations, with few downward pressures available to stabilize pricing,” the report notes. What’s more, “rising occupancy, limited supply growth, and competition between leisure and corporate travelers will leave hotels with the confidence to increase transient rates.”