Business Travel Costs Expected to Rise in 2009

Posted on October 29, 2008 by LCT Staff - Also by this author - About the author

NEW YORK CITY – Business travelers will spend more in 2009 on their trips, but the rate of increase will be held in check by current economic conditions, says American Express in its annual global business travel forecast.

The average cost per domestic trip in North America will increase by 1.2% to $1,002 in 2009, the company estimates. Last year, American Express estimated a 3.9% increase for 2008.

The average cost per international trip for North American business travelers will increase by 3.5% to $3,452. Last year, American Express estimated a 7.8% increase for 2008.

"Travel costs will not change significantly in 2009," says Hervé Sedky, vice president of American Express, Global Advisory Services. While the cost increase in 2009 will be more "steady," corporate travel managers will continue to scrutinize their spending patterns closely, he says. "Savvy organizations are making sure that travel not yielding revenue is eliminated or substituted by use of technology."

American Express's results mirror other travel survey findings. Earlier this month, the National Business Travel Association released a survey that underscored travel managers' concern over rising costs. Its members who responded to the survey said domestic trips now cost $140 to $175 more than at the end of 2007. International business travel costs have increased $315 to $400 per trip since December. More than 50% also said new airline fees are encouraging less air travel and are eliminating all non-essential corporate travel.

KDS, a travel and expense management firm, also said a recent survey of "hundreds of clients" revealed that 54% of respondents believe that the financial crisis will force cuts in travel between now and March 2009. More than one-third said they have had to cancel booked trips.

Among other findings from American Express's forecast:

•Air travel: Economy airfares for domestic trips in the USA could either fall by 5% in 2009 or increase up to 5%. International fares from the USA in business class could rise 1% to 6%. American Express couldn't further narrow the forecast ranges because "the economic conditions that we are facing in the last few months are unprecedented," says Frank Schnur, vice president of American Express, Global Advisory Services North America.

The airlines' reduced capacity, ticketing restrictions (such as the Saturday-night stay rule) and additional fees for checking bags and other ancillary services will drive overall air travel costs higher. But sluggish demand and potentially falling fuel prices will keep the rate of increase in check, according to American Express.

•Hotels: American Express's forecast for hotel room rates has similarly wide ranges. Rates for mid-range hotels in the USA, such as Hilton Garden Inn or Courtyard by Marriott, could fall 1% or increase up to 5.5%. Rates for upscale hotels could fall 2% or rise up to 4.5%. Domestic demand is slowing, but it could be offset by inbound international travelers, the forecast says.

•Rental cars: The cost of renting a car in North America could fall by as much as 2% or increase up to 3%. Industry competition remains stiff, which could help lower prices. But rental companies' costs of buying and maintaining fleets are rising. Schnur cautions that rental companies will be more aggressive in enforcing restrictions, such as reducing the grace period window for returning the car. "Corporate managers really need to be on top of these restrictions," he says.

•Meetings: Small meetings — to train employees, gather sales reps and report finances — make up about 70% of the total meetings spending and will remain largely unaffected, American Express estimates. But large meetings will likely "be scaled down," Sedky says. More companies will move large meetings to smaller hotels and spend less on production, he says.

Source: USA Today

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