Business Travel Monitor Reveals Savings Opportunities for Air, Hotel Rates

Opportune time to analyze corporate rates to ensure they are competitive as airfare rates hit lowest point since Q2 2005 and hotel rates tick down, American Express reports

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San Diego — August 28, 2009 — Domestic and international airfare rates are at their lowest point since the second quarter of 2005, while hotel rates showed a modest decrease in Q2 of this year against the previous quarter, presenting significant opportunities for procurement and travel professionals to negotiate additional savings, according to North America Business Travel Monitor (BTM) data and analysis from American Express Business Travel.

The Business Travel Monitor, the industry's pricing benchmark published by eXpert Insights, the newly created research arm of Global Advisory Services, revealed that international and domestic airfare prices decreased year-over-year in the second quarter of 2009. Mixed results are seen in hotel rates year-over-year, where rates decreased internationally and remained flat domestically.

Signs point to corporations continuing to scale back on business travel spend and frequency. In addition, airlines are switching gears and are competing heavily to gain the business of a smaller pool of business travelers.

Highlights of the Q2 BTM included:

  • Average international airfares paid decreased 19 percent year-over-year;
  • Average domestic airfares paid decreased 18 percent year-over-year;
  • Average international booked hotel rates decreased 12 percent year-over-year, but increased 6 percent from Q1 to Q2;
  • Average domestic booked hotel rates remained flat year-over-year, but decreased 2 percent from Q1 to Q2;
  • Car rental rates posted slight decrease of 3 percent in Q2 2009 both from the previous quarter and the prior year.

"Despite widespread discounting and trading down in business travel, we are seeing a leveling in pricing and even an uptick in some areas in our Q2 versus Q1 data, as well as, in our monthly BTM data," said Christa Manning, director with eXpert Insights at American Express Business Travel. "With demand still down significantly versus last year, there are many savings opportunities in the market for savvy procurement and travel management professionals. It's a critical time for companies to have an aggressively managed business travel program to help lock in competitive rates and effectively control costs while keeping travelers on the road."

International Airfares: According to the report, several factors led to the decrease in international airfares paid. One key factor: Companies are employing the cost saving measure of requiring travelers to use of coach class seats instead of business class. In the second quarter, 36 percent of booked travel was in business class versus 50 percent in the second quarter of 2008. Also, airlines are making lower cost fares more available as they compete internationally, and the airlines also are deepening corporate discounts on the majority of fare classes in Q2 2009.

Year-over-year Average International Airfares Paid in Q2
Q2 2004 - $1,523
Q2 2005 - $1,609
Q2 2006 - $1,709
Q2 2007 - $1,788
Q2 2008 - $1,980
Q2 2009 - $1,603

Quarterly 2008 and Q1 through Q2 2009 International Average Airfares Paid
Q1 2008 - $1911
Q2 2008 - $1980
Q3 2008 - $2010
Q4 2008 - $1918
Q1 2009 – $1680
Q2 2009 - $1603

Domestic Airfares: Airfares continued to fall due to a drop off in demand as economic conditions remained challenging, as they have since late 2008. The decrease can be attributed to lower fares becoming more available through the airlines, and corporate policies requiring travelers to book further in advance for those lower fares.

Year-over-year Average Domestic Airfares Paid in Q2
Q2 2004 - $233
Q2 2005 - $218
Q2 2006 - $247
Q2 2007 - $236
Q2 2008 - $260
Q2 2009 - $212

Quarterly 2008 and Q1 through Q2 Domestic Average Airfares Paid
Q1 2008 - $233
Q2 2008 - $260
Q3 2008 - $253
Q4 2008 - $237
Q1 2009 - $213
Q2 2009 - $212

International Booked Hotel Rates: New hotels expanding globally increased supply and drove international average booked rates in 2008 down by 5 percent. So far this year, average room rates are up 6 percent from Q1 in Q2 internationally, attributable to a number of European cities seeing increasing occupancy, which pushes rates upward.

International Average Booked Rates Paid
2004 - $197
2005 - $212
2006 - $230
2007 - $266
2008 - $252
Q1 '09 - $228
Q2 '09 - $241

Domestic Booked Hotel Rates: Slowing demand for domestic hotel bookings and increased availability pushed prices down nearly 3 percent in North America last year. This year Q1 to Q2 average room rates have decreased 2 percent.

Domestic Average Booked Rates Paid
2004 - $132
2005 - $137
2006 - $141
2007 - $157
2008 - $153
Q1 '09 - $153
Q2 '09 - $150

"If buyers haven't looked at hotel rates since the end of last year, now is an ideal time to analyze hotel rate potential savings for 2010 corporate programs," Manning said. "There is an opportunity to secure significant discounts based on continued market pressures, but companies will have to negotiate effectively as hotels compete aggressively for the business buyer and resist further rate drops."

Car Rental Rates: In Q2 2009, the overall cost of car rental decreased slightly from Q1, attributable to difficult economic conditions that have led to changes in company and traveler behavior. An overall lower demand and reduced pricing is the net result of these conditions. Also contributing are slightly reduced inventories at the rental car companies and rental firms aggressively negotiating with corporate buyers to lock in more consistent volumes of business.

Average Daily Cost of Car Rental
2004 - $65
2005 - $66
2006 - $69
2007 - $72
2008 - $74
Q1 '09 - $73
Q2 '09 - $71

The American Express Business Travel Monitor can also be accessed through a subscription to eXpert Insights, a dedicated research practice within Global Advisory Services, created with the goal of helping companies cut the costs of business trips by identifying and implementing best practices and creative strategies within their T&E programs.