SURVEY: Fares surge with strong demand

20th Sep 2006

According to the Business Travel Monitor released by American Express Business Travel, corporate travel prices rose in the second quarter amid strong demand, with higher year-over-year costs for airfares, hotel rooms and rental cars.The recent surge in travel spurred double-digit price hikes for U.S. domestic airfares in the second quarter of 2006, with the average fare paid jumping 13 percent to $247 one-way compared to $218 for the same period in 2005. Meanwhile, international airfares continued their climb, and both domestic and international hotel rates and car rates also were higher.

“More travelers in the air, combined with higher fuel prices and fewer available seats and hotel rooms, has led to considerable price increases - a trend we expect to continue,” said Frank Schnur, Vice President of Consulting for American Express Business Travel’s Advisory Services. “In this challenging environment, companies will increasingly look to their travel management providers to help them contain costs and maximize their business travel investment.”

Average Fare Paid Rises

In a clear indication that U.S. airlines have regained their pricing power, domestic airfares are now at their highest level since year-end 2001, according to the Business Travel Monitor, which tracks 329 domestic city pairs. The domestic average fare paid for business travel during the second quarter of 2006 jumped to $247 one-way, up 13 percent from $218 one-way posted in the second quarter of 2005.

Average one-way discount economy domestic fares, which account for the majority of all domestic ticket purchases, rose to $101 in the second quarter of 2006, up three percent from the same period a year ago. Meanwhile, average business class fares showed the largest year-over-year fare increase among travel cabins, up 14 percent to $358 one-way in the second quarter of 2006.


“Due to record-high load factors and high fuel prices, we’ve seen several domestic fare hikes in 2006, with most of the recent increases recorded in short-notice, business-type fares,” said Mr. Schnur. “The net effect is a much tighter negotiating market, underscoring the importance of a strategic travel management program. For instance, American Express Business Travel Clients continue to pay less than published typical business airfares.”

International and Regional Travel Air Fare Rates Increase

Across the American Express Business Travel Monitor’s 160 international routes, for the second quarter of 2006 the international average fare paid grew six percent to $1,709, with discount economy airfares increasing nine percent to $1,150, as compared to the second quarter of 2005. For the same period, business class airfares also climbed six percent to $4,088 while first class airfares rose four percent to $6,000.

“Greater demand and significant fuel-related fare increases for many international routes were, to some extent, offset by new entrants who kept rising fares in check,” Mr. Schnur added.

International and Domestic Hotel Rates Rise

American Express Business Travel reported steady increases in both U.S. domestic and international booked hotel rates in the second quarter of 2006. Average domestic booked hotel rates rose three percent to $139 in the second quarter, compared to the same period last year.

A closer look at prices in the top 34 domestic hotel markets, however, shows widening pricing gaps across the board. Several domestic hotel classes in these markets recorded double-digit, year-over-year increases in average booked hotel rates in the second quarter of 2006: Budget jumped 26 percent to $167, Economy rose 12 percent to $162, and Deluxe increased 10 percent to $219 a night, as compared to the second quarter of 2005.

At the same time, the average international booked hotel rate soared 11 percent to $237 in the second quarter of 2006 - the highest increase in five quarters - when compared to the same period in 2005.

“Relatively slow supply growth is leading to high occupancy rates and more expensive rooms per night, especially in top business destinations where availability is already constrained,” said Mr. Schnur. “While travel buyers are currently looking at a sellers’ market in the hotel space, with the right information at their fingertips and a focus on purchasing power, many travel buyers can keep price increases to a minimum.”

Car Rental Costs Grow Year-Over-Year

Further, American Express Business Travel reported that the average daily cost for car rentals rose four percent, to $67.26, when compared to the second quarter of 2005. Meanwhile, travelers rented cars for longer periods as the average length of rental grew to three days in the second quarter of 2006, up from 2.9 days in the second quarter of 2005.

“Over the last year, fleet pricing has been rising at a double-digit pace, capacity is tight and refueling costs are still going up,” Mr. Schnur said.


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