The National Business Travel Association
(NBTA) today released its 2004 Business Travel Overview and Cost Forecast, which provides a concise look into future business travel costs across several key markets. NBTA predicts that business travel costs will increase 6% in 2004. The forecast, compiled by NBTA research staff, also predicts that in 2004:

Business airfares will increase by 5%

Hotel rates will increase by 3%

Corporate car rental rates will increase by 2%

In 2003, corporate travel budgets were curbed as the war in Iraq, SARS, terrorist threats and economic concerns forced corporations to spend conservatively. Many corporations mandated stricter adherence to travel policies in order to keep costs down. In addition, corporations turned to alternative suppliers and new technologies to get the best economic value from their travel purchases. Finally, companies will be increasing their meeting and convention budgets in 2004 and these funds will be managed more and more by corporate travel professionals.

“Travel departments have been adjusting to tougher economic conditions and security concerns during the past few years,” said NBTA President and CEO Carol Devine. “As we move into 2004, NBTA predicts the beginning of a recovery in business travel. Yet corporations will still be focused on the bottom-line, and the cost-consciousness of the past two years will remain.”

Airfare

2003 was another difficult year for U.S. airlines, with travel declining due to lowered business budgets and security concerns stemming from the war with Iraq and the SARS epidemic. Some major airlines tried to stem their losses and stimulate demand by lowering business fares. Low-fare carriers continued to eat into major airlines’ customer bases. In 2003, discount carriers transported 20% of domestic air travelers, while the major airlines’ share of domestic passengers declined. Fuel costs were another major concern in the airline industry. The war with Iraq and other uncertainties in the Middle East caused spot fuel prices to increase 100% from 2002. Airlines imposed fuel surcharges in order to meet these added costs, further increasing the cost of air travel to consumers.

Overall, business airfares are expected to rise 5% in 2004. Average business airfare is expected to be $1,273.

Hotel

Occupancy rates slowly increased in 2003 and the trend is expected to continue in 2004. However, luxury properties continued to suffer from tighter corporate travel budgets, as more travelers frequented more mid-priced brands. In a July 2003 NBTA survey, 83% of travel managers said they were using more mid-priced hotels in 2003. Customer satisfaction in this sector is increasing, with improvements linked to investments in guest experience, better staffing, and select services and amenities. Hotel revenue have suffered from reduced telephone charges, as business travelers have turned to mobile phones to avoid hotel surcharges. In 2004, hotel profitability will remain vulnerable to cautious business spending, price-sensitivity, and security threats. Yet, as occupancy increases, hotel revenues should follow suit.

Overall, hotel rates are expected to increase 3% in 2004.

Car Rental

In 2003, the trend of business travelers driving for local business trips continued. Car rental companies have made strides in improving customer satisfaction, with amenities like express service, greater selection, global positioning systems, and internet self-booking. Gasoline prices and state and local government taxes, while high, had only marginal effects on corporate rental levels in 2003. NBTA predicts that the sector will remain flat in 2004, with only minor revenue and cost increases. In addition, the top four car rental companies will likely lose some market share to low budget suppliers in certain domestic markets.

Corporate car rental rates are expected to increase by 2% in 2004. The average corporate car rental rate will be $69.

 

——-