A Tough Season Ahead

IT SHOULDN'T SHOCK ANYONE TO HEAR THAT HOTEL RATES IN THE COMING YEAR WILL CONTINUE TO RISE, due to a squeeze on the market from both the business and leisure sides of the industry. This means that for the fifth straight year since 2003, when travel started to rebound from the effects of 9/11, corporate travel managers can expect another tough negotiating season for hotel rates.

"Across the globe, the industry continues to favor hoteliers, with the sharpest increases in the Pacific/Asia region," says Mike Streit, vice president and global leader of American Express Business Travel Advisory Services, which recently released its Global Business Travel Forecast, based on research of supplier markets and regional economic trends.

"In North America, rates will continue to climb, but at a slower pace than in previous years," Streit says, adding that hoteliers may set minimum or maximum stays during peak periods.

The highest increases are happening in the upper-tier properties, particularly in Europe where business travelers have to compete with vacationers for hotel rooms. "In France, rates are expected to continue to see healthy demand, as Paris remains popular with both business and leisure travelers," says Priscilla Campbell, practice leader of hotels for AmEx's advisory services. "Cities surrounding London also will feel the supply pinch."

Though mid-price hotels will see rate increases, there is relief to be had in that market. "Moderately priced hotels have been refreshing their products, and the combination of lower occupancy rates and updated products will make mid-scale properties more attractive," Campbell says. Consequently, AmEx's research finds, many travel buyers are downtrading preferred properties in search of value. 2008 Projected Price Increases

AmEx reports that in 2008 the average cost per domestic trip should go up $63 to $1,110, while internationally costs are expected to increase by $205 per trip to an average of $3,171.

"Airline capacity will remain at high levels, opening the door for airlines to charge a premium for highly coveted seats, though more competition from 'open skies' will help temper prices," Streit says. Also a factor is the continued expansion of low-cost carriers across the U.S. and Europe, especially in England.

Preliminary data from the National Business Travel Association's 2008 report paints a similar picture across all segments. After surveying 215 NBTA member buyers, the organization found that business travel will continue to grow in 2008, though the rate of growth will level off somewhat next year. Much like American Express, NBTA predicts published airfares to increase 6 to 10 percent over 2007, with hotel rates and car rental spending both increasing 5 to 7 percent.

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