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American Express Sees Buyers Market, Lower Air & Hotel Rates.

April 29, 2009 By: George Dooley


Coach class overtook business class as the highest percentage of bookings in the first quarter of 2009, reinforcing the belief that companies are implementing tighter travel policies and cost savings strategies, American Express Business Travel (AEBT) reports in its new Business Travel Monitor (BTM) analysis. The Business Travel Monitor also exposed double digit year-over-year decreases in air and hotel rates.

AEBT also said domestic and international airfare increased in 2008 as hotel rates decreased, and that sliding economic conditions definitively have shifted business travel to a buyers’ market in 2009. Other highlights note that the purchase of economy class air seats surged in the first quarter and that, in 2010, hotel negotiation promises new opportunities for buyers as rates drop 12 percent in the first quarter of 2009.

Data from the BTM revealed that international and domestic airfare prices ended 2008 up year-over-year and hotel rates down slightly. Looking at the first quarter (Q1) 2009 data, signs point to the effect of a weakening economy, belt tightening by corporations, and falling consumer demand noticeably impacting travel rates across the board.

“While upward pricing pressures challenged companies to control travel and related costs throughout 2008, a buyers’ market emerged at the end of the year, and is in full force today,” said Frank Schnur, vice president of global advisory services for American Express Business Travel.  “Close tracking of travel prices is paramount as companies focus on optimizing their travel activities and savings as they navigate this unprecedented time of price cutting and corporate contract renegotiations.”

Other results of the study include:

*    Average domestic and international airfares paid increased 7 percent and 6 percent respectively in 2008 as a whole, but began to slide in Q4 2008,continuing into Q1 2009.
*    Q1 2009 domestic average airfares paid are down 9 percent compared to the first quarter last year.
*    Q1 2009 international average airfares paid are down 12 percent versus Q1 2008. 
*    Average international and domestic booked hotel rates both showed year-over-year decreases of 12 percent in the first quarter 2009.
*    International business class air travel fell from an average of 50 percent of all bookings in 2008 to 39 percent in Q1 2009.
*    Economy class international air travel surged 13 percentage points to 56 percent of all travel in Q1 09 versus a steady 43 percent throughout 2008.
Domestic Air

In line with international trends, domestic airfares also surged in 2008 as a result of fuel volatility. “Base fares began to level off as airlines chose to charge separately for in-flight meals, choice seating, and other services to off set intolerance to base fare increases," the report said. "Airfares then fell victim to a drop off in demand as economic conditions further deteriorated toward the end of the year. Similar to international fares, a fall in price was seen in Q4, but the most dramatic drops were in the first months of this year.”

Report on Hotels

“New hotels expanding globally increased supply and drove international average booked rates in 2008 down by five percent.  Slowing demand for domestic hotel bookings and increased availability pushed prices down nearly three percent in North America last year.  So far this year, average room rates are down 12 percent for both categories from the first quarter of 2008. Of note, the highest price decreases in North American hotels fell within the budget and deluxe categories as both tiers reduced prices to attract travelers looking for cost-conscious alternatives,” AEBT says.

“The economic environment is fueling proactive off-season communication between travel buyers and suppliers as they work together to secure the best rates and ensure credit for volume. Those willing to be pragmatic and proactive on both sides of the table can reap the rewards.  For the first time, we are seeing buyers renegotiate greater reduced rates for a longer period of time, in some cases two years. Hoteliers are taking advantage of these rates by reaching out to potential new clients to compete for business,” said Schnur.

Car Rentals

“In 2008, the overall cost of car rental increased slightly as demand increased and buyers saw the impact of fuel costs over the course of the year. Taxes and local fees on car rental transactions also continued their steady increase.  However, slightly weaker demand in the first quarter of the year has stabilized costs so far this year. There was also increased interest in intermediate and hybrid cars versus larger cars for overall cost control and fuel savings.  This reflects adherence to new policies surrounding ground transportation and eco policies. Advisory Services is predicting the overall daily cost of car rental will remain flat for 2009,” AEBT says.

On April 30 at 2 p.m. EDT, American Express Business Travel is hosting and moderating a live online event with industry leaders representing Hilton Hotels, InterContinental Hotels Group, Omni Hotels and WORLDHOTELS to discuss the impact of the current economic environment on the hotel industry, mid-year renegotiations, as well as provide insight on the best methods to support both travel buyers and sellers through the upcoming summer travel season. The event will take place on BusinessTravelConneXion.com, an online community.


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