Although the recession persists in many sectors, the buzzword in the travel industry is "pre-recession," as the cost of business travel is rising toward levels not seen since 2008 — due in large part to the popularity of face-to-face meetings, according to American Express Business Travel, which yesterday released first quarter figures on business travel pricing trends from its Business Travel Monitor (BTM) benchmarking tool.
AirfaresAccording to the latest BTM report, domestic business travel airfares have surpassed their pre-recession average — which was $233 in the first quarter of 2008 — climbing 10 percent from $225 in Q1 2010 to $247 in Q1 2011. International airfares, meanwhile, grew 8 percent from $1,726 in Q1 2010 to $1,866 in Q1 2011, which is still slightly below the Q1 2008 average of $1,911 but significantly higher than the Q1 2009 average of $1,680.
"Airfare increases have been expected given the rise in the cost of oil and the return in demand in business travel," said Christa Degnan Manning, director, eXpert insights research, American Express Global Business Travel. "On top of this, airlines are continuing to form alliances and joint ventures. As prices continue to increase and capacity levels remain tight, companies need to ensure they are following the market, reviewing travel spend and ensuring they are using suppliers and implementing policies that facilitate optimal cost savings opportunities."
Hotels
When it comes to hotels, domestic prices are approaching pre-recession levels, but have not yet surpassed them, while international rates remain low. Domestic average hotel rates paid rose 3 percent from $146 in Q1 2010 to $150 in Q1 2011; in Q1 2008, they were $152. International average hotel rates paid, meanwhile — which were $260 in Q1 2008 — rose from $228 in Q1 2010 to $238 in Q1 2011.
"With the moderate rate increases we're seeing this year that are due to increase in demand, companies need to be vigilant in ensuring travelers receive their corporate negotiated rate," Manning said. "Hoteliers are likely to try to continue increasing rates particularly, as we head into the negotiating season. However, companies that keep a close eye on market conditions and benchmarking actual rates paid in key travel destinations will be better positioned to maintain their discounts."
Hotel rates saw the biggest gains in San Francisco (up 16 percent to $206), Seattle (up 9 percent to $152), Austin (up 8 percent to $161), Omaha (up 8 percent to $145) and New York (up 8 percent to $290).
Meetings
A major driver of upward pricing trends, according to American Express, is meetings, which are in the midst of a major recovery that's contributing to the larger business travel recovery.
As proof, American Express cited a new study, "Business Travel: A Catalyst for Economic Performance," that was commissioned by The World Travel & Tourism Council (WTTC), conducted by Oxford Economics and sponsored by American Express Global Business Travel. According to that study, business travelers on average felt that 38 percent of their customers would be lost to competitors, and that their companies would lose 37 percent in annual sales, without face-to-face meetings.
"This important research further demonstrates travel's role as an engine for business success given its significant influence over customer relations, innovation and employee engagement, all of which is necessary for a company's long-term sales growth," said Charles Petruccelli, president, American Express Global Business Travel. "We are seeing our clients understand this value and put their employees back on the road, but the affects of the recession still weigh on their budgets and they are looking to drive a return on every dollar spent on travel."
Added Manning, "One way to combat rate increases in 2012 would be to lump group travel volumes with transient commitments, thus leveraging total travel activity to maximize savings. Meetings are certainly part of the demand equation and will play a contributing factor in specific market rate changes next year."