American Express Business Travel Forecast 2013

Business travel pricing set to rise further

Business travel costs in Latin America, Asia and Eastern Europe will rise again next year, according to the Global Business Travel Forecast 2013 from American Express. Whereas economic uncertainty in Europe – driven chiefly by the financial crisis – and the slowdown of growth in China are curbing price rises on the markets there, most emerging markets are likely to see a further pickup in pricing. Companies are planning investments there to secure growth opportunities, and brisk demand for business travel to these countries is ratcheting up prices. Meanwhile, price increases in Germany are moderate.

Of all the Eurozone countries, Germany has so far been least heavily hit by the economic downturn. “If this situation persists, we expect the high demand for business travel in Germany to stay flat next year,” says Anton Lill, General Manager Business Travel at American Express in Germany. Amid the forecast scenario of consistently high demand, air fares and hotel prices in 2013 are expected to climb slightly faster than the rate of inflation.

The shrinking European economy in 2012 and uncertainty over the future of the euro are significantly impacting travel across the whole of the continent. These two major issues are the factors behind what are expected to be low single-digit increases next year in the cost of air fares and hotel accommodation in Europe.

In Germany the Business Class tariffs on long-haul flights will edge up by two to four percent. In all probability higher long-haul air fares will affect connections to Asia, the home of important export markets for Germany. Economy Class air fares on short-haul routes will rise less steeply, by between one and three percent, as competition among the budget airlines continues to intensify. In terms of accommodation, Germany benefits from top tourist destinations such as Berlin. A raft of new hotels is poised to open there in the next few months, with more in the pipeline. But since German travellers tend to take a rather conservative economic approach, prompted by concerns over the euro and the fear of having to assume liability for other Eurozone countries’ debt, the corporate hotel rates negotiated will rise by between 1.5 and four percent.

Car-hire rates are not expected to be ramped up in Germany, as more and more travel buyers in Germany are switching to the RFP (request for proposal) process and car rental firms are waging price wars in the battle for customers. As a result, basic rates are even expected to fall between one and three percent.

Price trends in Europe, the Middle East and Africa (EMEA) do not follow a uniform overall pattern. In those countries not so severely affected by the economic crisis prices are expected to gather pace – in Russia, for example, by between five and seven percent on long-haul Economy Class trips. In view of its situation as a hub for the countries to the south and west of the African continent (and owing to the abundant natural resources in those regions), South Africa will also occupy a special position. But for countries hard hit by the business crisis business travel prices are very likely to be lowered. Long-haul air fares in Spain, for instance, will fall between five and eight percent.

The economic situation in Europe, and most particularly in the Eurozone, is having a huge effect on the corporate hotel rates currently being negotiated. The European countries are having to contend with inflation, cost-conscious travellers and waning economic strength, which is why price increases are not expected there on a grand scale. Exceptions are Russia, the Middle East and Africa, where price rises are expected.

In Europe, an increase in hotel taxes next year could drive up prices artificially in comparison to 2012, and this has been factored into the Global Business Travel Forecast’s predictions. In all likelihood car rental rates in EMEA will remain flat.