Nov

29

Did you know that, Fall 2006

Filed Under Airlines, American Express, Car Rentals, Hotels 

Sandal Resorts

Experts Predict 2007 Airline, Hotel, Car Rental Costs To Rise

A spate of forecasts issued by corporate travel industry consultants and travel management companies call for across-the-board supplier price increases in 2007, largely driven by corporate demand.

Though a handful of analysts predicted airfare hikes would cease for the remainder of 2006, particularly as the price of fuel slips back from record highs, most forecasts call for higher fares in 2007.

BCD Travel, for example, estimated airfares would increase 7% to 11% in 2007 from this year’s levels. This would continue an established trend: Domestic airfares have risen to their highest level since the end of 2001, with average ticket price at $247 for a one-way trip, up 13% from last year, according to American Express Business Travel Monitor, which tracks a variety of travel expense categories booked by American Express Business Travel clients.

The hotel industry has reaped the most benefits from the growth in business travel during the past few years, and 2007 does not promise an end to that trend.

Very strong demand coupled with a dearth of new full-service hotel development has allowed hoteliers to raise rates. BCD predicted 2007 daily hotel rates would average
6 percent higher than 2006 rates, with some markets rising as much as 10% to 14%.

Average negotiated corporate rate increases won’t be lower than the 5.25% rates increased this year, said Bjorn Hanson, head of the Pricewater-HouseCoopers hospitality and leisure practice, and gateway city increase could reach into double-digit percentages.

Car rental companies are facing pressure from increasing fleet costs caused by the struggling automobile industry-which is trying to improve its bottom line by de-emphasizing agreements with car rental firms – and likely will attempt to raise rates in the neighborhood of 10% from 2006 figures, said Neil Abrams, president of Purchase, N.Y.- based Abrams Consulting Group. BCD estimated car rental costs would rise 5% to 7%.

Meanwhile, in the second quarter of 2006, American Express Business Travel clients saw car rental costs rise 4 percent to $67.26, compared with the second quarter of 2005.

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