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Business Travel Costs Going Up in 2007

By Dan Schlossberg
ConsumerAffairs.com

January 1, 2007

• Be a Traveler, Not a Target • Money Solutions for the Traveler • Travel News

Consumers who travel on business will fork over more dollars to airlines, hotels, and car rental companies, according to a new report from American Express.

The annual American Express Global Business Travel Forecast blamed the increases mainly on high demand and high fuel prices.

It noted that airfares have jumped 18 per cent over the last two years because carriers have made seats more scarce -- even though demand for them has been steady. With flights nearly 80 per cent full, air travel has morphed into a seller’s market for the first time since airline deregulation, enacted in 1978, created a myriad of discount carriers.

According to the American Express report, fares may jump another 6 per cent in 2007, a year when the number of business travelers is also likely to rise as companies provide troubled customers with more face-to-face meetings.

Fuel costs, which also helped to hike airfares over the last two years, have had a similar impact on the cost of renting cars. American Express experts predict gasoline could hit $3 a gallon again by March and remain at that level. If they’re right, rental car costs will rise as firms pass along increases to customers.

The American Express prediction is a six per cent increase -- about half of the increase experienced in 2006 for renting an intermediate sized vehicle at average airport prices.

Like airlines, car rental firms are also exercises strict capacity control, making fewer cars available and pushing prices upward as a result.

Since business travelers often have little choice of airline and only limited choice of car rentals, their best option for keeping costs reasonable may be rethinking hotel choices. With luxury hotel costs projected to jump by 8 per cent and midprice rooms in the 3-6 per cent range, many business travelers may make the switch to less expensive properties. Companies will be asking employees to consider shorter stays and find less-convenient, less-costly places to stay, such as those removed from airport or downtown locations.

According to the American Express report, the typical business trip in 2007 will cost 4.5 per cent more than it did in 2006. Clever corporate travel executives hope to protect the bottom line by neutralizing or contain that development.

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