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October 26, 2007
Business Travel Costs to Rise in 2008
Hotel rates in key cities throughout the United States, Europe and Asia could experience high double-digit increases next year. This was among the findings of American Express' annual Global Business Travel Forecast released this week, which predicts that continuing demand for travel services will outweigh supply in 2008, driving up rates for airfare, car rentals and hotels around the world.

In the United States, the average rate increase for mid-range hotels is predicted to be 4 percent to 6 percent while the rate increase for upper-range hotels is expected to be 5 percent to 7 percent. However, hotel rates in demand-heavy markets within the United States could increase as much as 14 percent, according to the Forecast. One force driving hotel rates up is that demand that outpaces supply in key markets. American Express also reports that hotels "have improved yield management practices to maximize profits."

Domestic/short-haul economy class airfare in the United States is expected to increase 1 percent to 5 percent, while international/long-haul business class airfare is expected to increase 5 percent to 10 percent next year. Forces driving airfare prices up include more sophisticated airline pricing technology and premium prices for certain seats (such as flat beds, seats with more leg room, etc.).

Car rental costs in the United States are predicted to rise 2 percent to 4 percent, largely due to pressure from taxes and fees that add to overall costs of rentals, according to the Forecast.

"Travel managers and procurement professionals can expect another capacity-restricted, challenging year and a continued push to keep travel and entertainment budgets in check. However, opportunities still exist to further control costs without curtailing business travel," said Mike Streit, Vice President and Global Leader for American Express Business Travel Advisory Services said in a press release. "Heading into 2008, successful T&E management strategies will focus not just on controlling travel expenses, but also on identifying additional areas to control costs and save, such as entertainment and related services including corporate meetings and events."

American Express offered employers some strategies for companies in order to handle these increasing costs. These strategies include building travel program compliance via the implementation of change management techniques that focus on changing business travel behavior in "five key areas":

  1. Lowering use of refundable airfares
  2. Optimizing use of advance purchase fares
  3. Defining more narrowly when first/business class fares can be used
  4. Driving online bookings
  5. Improving use of preferred suppliers, especially hotels where compliance has historically hovered around 50 percent

For the full press release announcing the Forecast, click here.

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