Signs from across the business travel industry are showing consistent improvement with demand, giving some pricing power back to suppliers, particularly airlines, American Express Business Travel (AEBT) reports.
Airfare rates are holding steady and business travelers are trickling back to the front of the plane. The hotel sector still lags with its pricing power, but demand will continue to better position their rebound, while simultaneously going through a shift in destination trends – signaling the on-going transition and staying power of the “new normal” in business travel, AEBT says.
American Express Business Travel tracks pricing for actual airfares paid by corporate travelers on the most popular business travel routes for domestic and international travel along with paid hotel rates in key business travel markets. Highlights and trends for the first four months of 2010 include:
As airlines consolidate and change fee structures to improve financial stability, corporate buyers must re-evaluate industry developments and identify new opportunities for savings as a way to improve their overall air travel programs. Year-over-year international airfare increased 3 percent for the first quarter as year-over-year domestic airfare increased by 6 percent.
AEBT reports that historically there has been close to an even split of passengers flying businesses class versus economy for international travel. However during the heart of the recession last year— particularly in the second quarter of 2009— the percentage of tickets booked in business class hit its lowest rate at 36 percent. As the trending now shows, percentage rates are on the rise, indicating travelers are moving back to the front of the plane.
Despite the modest return in business travel, hotel prices are still lagging because, unlike the airlines where planes could be grounded to accommodate change in demand, the same cannot be said for a hotel, AEBT reports. Because of this, hotel suppliers are lacking pricing power even as travelers return to the road— keeping rates low. However, as the recovery continually gains momentum, higher occupancy levels will position suppliers to begin demanding premium pricing again— and buyers should work to cultivate supplier relationships now to mitigate future price increases. Year-over-year international and domestic booked hotel rates each decreased by 0.5 percent during the first quarter
Iin ranking order, London, Paris, Frankfurt, Dubai, and Amsterdam were the top traveled to cities for business travelers in 2009. While the destinations have remained the same in the first quarter of 2010, ranking has not. In 2010, London remained in the top spot, with Frankfurt pushing into the number two spot— seeing a growth of 28 percent more trips— while Paris fell to number three. Interestingly, Amsterdam surpassed Dubai to take the fourth spot, as Dubai has seen 21 percent less trips this year.
In Asia, the top three business travel destinations remain the same between the first quarter of 2010 and first quarter of 2010 were Tokyo, Shanghai and Singapore. However Hong Kong was pushed out by Beijing as the fourth most popular business travel hot spot in 2010.
As the industry looks towards recovery, travel managers will need to keep a close eye on trends to make the most of their travel programs, particularly with ongoing merger and acquisition activity in the airline industry, and the unbundling of fees by hotels and airlines. AEBT says companies must be vigilant about adjusting their strategies as necessary in order to continually drive savings.