Industry Research

Air, Hotel Prices Plummet In FQ 2009

Posted on May 6, 2009 by LCT Staff - Also by this author - About the author

NEW YORK — Average airfares and hotel rates dropped dramatically in the first quarter of 2009 as demand plummeted after the travel industry experienced notable price increases in 2008, according to the American Express Business Travel Monitor, released Thursday.

International airfares paid are down 12% year-over-year to $1,680 as the traditional users of premium class seats — corporate travelers — are migrating to economy class amid travel cutbacks.

According to American Express, international business class travel went from half of all international bookings in 2008 to 39% in the first quarter of 2009. Last year, international airfares increased 6% year-over-year to $1,955.

First-quarter domestic average airfares decreased 9% to $213 compared with the first quarter of 2008. Domestic airfares increased 7% to $246 last year despite a decrease in base fares, as many airlines embarked on unbundling and ancillary revenue initiatives leading up to the stark fourth-quarter demand drops.

The Business Travel Monitor includes both average published and purchased fares on hundreds of routes including unrestricted first-class, business, economy and discounted, restricted economy tickets. The average fares are the average one-way price paid by all Amex clients, including taxes and fees.

As more supply came into the lodging market globally in 2008, average international nightly rates, excluding taxes, fell 5% to $252 after several consecutive years of rate increases. Average domestic booked rates decreased 3% year-over-year to $153, after an 11.3% increase from 2006 to 2007.

In the first quarter of this year, as occupancy rates fell significantly, overall domestic booked rate, excluding taxes, averaged $180 — 11.3% less than the first quarter of 2008 and 17.4% less than the fourth quarter.

Car rental rates also saw an increase in 2008 as the segment felt upward pressure from high fuel costs and increased taxes and fees. The 2008 average daily rate — including mileage, gas, tax, and insurance — increased $2 to $74. In the first three months of 2009, it has dipped slightly to $73.

Source: Business Travel Monitor

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