Steep fuel costs, low supplies of airline seats and hotel rooms, and growing travel demand will push prices higher on airfares and hotels...
SAN FRANCISCO — Steep fuel costs, low supplies of airline seats and hotel rooms, and growing travel demand will push prices higher on airfares and hotels next year, according to the American Express 2006 Global Business Travel Forecast.
For U.S. business fliers, airlines’ reduced schedules and high fuel costs will push airfares up 5 percent to 8 percent on domestic economy-class flights, and up 2 percent to 6 percent on international business-class flights, according to the forecast.
Rising demand and a limited number of new hotel rooms will drive higher-end hotel rates up 2 percent to 5 percent and midrange hotel rates up to 3 percent higher in the United States.
Car-rental companies are likely to charge as much as 7 percent to 8 percent more as they face steeper costs related to maintaining their fleets, Matthew Davis, London-based director of global consulting at American Express, said in a telephone conference call.
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Overall, “This is a more aggressive forecast than last year. We’ve got very, very strong demand on long-haul flights, particularly to destinations such as Asia,” he said. Companies’ penchant for outsourcing “is driving strong demand across the globe.”
While demand is helping make higher prices possible, steeper fuel costs may be making them a necessity. Airlines hedge against fuel costs, but they can only do that for “a certain period of time,” Davis said.
And travelers shouldn’t expect much in the way of price relief from low-cost carriers: Fuel is often a bigger percentage of their overall costs than it is for traditional carriers.
Even the rash of bankruptcies among the big U.S. carriers — United Airlines, Delta Air Lines and Northwest are in bankruptcy protection now — won’t ease the hit to travelers’ pocketbooks.
Quite the opposite, Prashanth Kuchibhotla, a senior manager in Mount Laurel, N.J., with American Express’ eClipse Advisors, said on the conference call.
“In bankruptcy, the carriers rationalize and streamline and become more efficient,” he said. “They often remove routes where they were losing money. … We’re seeing a reduction in domestic capacity and where there’s a reduction in domestic capacity you see higher fares.”
Whether bankrupt or not, “Airlines have been cutting back some schedules [and] certain fleet types in order to become more efficient,” he said. “That’s driving up fares. … We expect that trend to continue.”
For travelers worldwide, American Express expects domestic economy-class fares to rise 3 percent to 6 percent, international business-class fares to increase 3 percent to 5 percent, high-end hotel rates to rise 3 percent to 5 percent, and midrange hotel rates to rise 1 percent to 3 percent.
Along with companies’ increasing desire to branch out into other countries — which is causing higher travel demand and thus price increases on airfares and hotel rooms — product upgrades on international business flights, such as flat beds, are contributing to higher prices, Davis said.
The global forecast masks wide disparities across regions.
While North American travelers will see domestic airfares rise as much as 8 percent, European domestic fares are expected to increase just zero to 4 percent, those in Japan, Asia-Pacific and Australia will rise 2 percent to 3 percent, and in Latin American/Caribbean countries fares will rise 2 percent to 5 percent, according to the forecast.
On international long-haul business-class flights, travelers can expect to pay 3 percent to 4 percent more in the Asia-Pacific region, 4 percent to 6 percent more in Europe and 4 percent to 7 percent more on flights originating in Latin America or the Caribbean compared with the 2 percent to 6 percent rise in North America.
Meanwhile, higher-end hotel-room rates will rise more steeply next year in the Asia-Pacific region (5 percent to 6 percent) and Latin America (3 percent to 7 percent) than in North America (2 percent to 5 percent), where room rates have already been rising for the past 18 months, according to the report.
Higher-end room rates in Europe are expected to rise 2 percent to 4 percent.