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American Express Global Business Travel Predicts Regional Economic Climates to Drive Air, Hotel and Ground Transportation Price Changes in 2015

Modest global economic growth and shifts in supply and demand expected to affect pricing across multiple regions

New York, NY, November 20, 2014 – The American Express Global Business Travel Forecast 2015 (the “Forecast”), predicts air, hotel and ground transportation prices to be neutral to slightly higher across all regions in 2015. At a country-by-country level, airline consolidations, stricter corporate travel policies and limited hotel supply are changing supply and demand dynamics and are also expected to impact pricing next year. In North America, an improving economy in the United States will likely cause price increases across all categories. Despite static economic progress across Europe, the United Kingdom is a brightspot for the region, with strong country-level financials and expectations for continued growth next year. Following years of positive growth predictions for Asia Pacific, the region is expected to experience more moderate price increases next year, as China stabilizes. In particular, this will be reflected in tempered hotel rate increases for the year. American Express Global Business Travel’s (“GBT”) annual Forecast provides subscribers with over two thousand pricing predictions across airfares, hotel rates, and car rental rates in the Americas; Europe, Middle East and Africa (EMEA); and Asia Pacific (APAC), as well as related travel management program recommendations.

“With new hotel supply limited in many major markets, air industry consolidation and a higher focus on yield management around the world, the slight increases in business travel demand expected should put more pricing power in the hands of suppliers next year,” said Patricia Partelow, Vice President, Head of Global Business Consulting, American Express Global Business Travel. “Consequently, it will become even more important for travel managers to have access to relevant and reliable data on their company’s travel spend. Armed with this insight, travel managers and their travel management companies can leverage it in supplier negotiations, as well as ensure an organization’s travel investments are appropriately allocated to support its overall business objectives.

“Although we have been producing the Forecast for over a decade, we’re proud to present our first edition as a stand-alone company equipped to power the development of the next generation of products and state-of-the art capabilities. We look forward to working with our clients to use this type of data and insight to deliver the greatest return on their travel investments.”

Americas Predictions & Dynamics

North America

In North America, business travelers can expect price increases across travel categories in 2015. With an improving economy and greater corporate confidence, capacity discipline by US carriers, and the recent consolidation of the domestic market, airlines are predicted to raise their long- and short-haul fares in the coming year. Inventory controls are likely to improve yields for airlines, leading to fewer seats in lower fare classes on busier routes. In Canada, the Forecast predicts prices to rise as the country continues to benefit from the improving US economy. Additionally, North American companies continue to redefine their cabin eligibility policies, which may create greater opportunities for Asian and European carriers who offer distinctive “premium economy” classes for companies looking to book cheaper seating options with minimal traveler resistance.

In 2015, North American hotel rates are expected to trend upwards, buoyed by favorable economic growth, increasing demand, and a lack of new inventory. After an extended period of relative weakness, hotels are looking to capitalize on favorable market dynamics to increase profitability. As the economy picks up and business demand grows, price increases are anticipated across the region; however, the degree of these increases will vary significantly city-to-city. In this environment, moderate and upscale hotels continue to explore ways to further differentiate themselves from the competition. Mid-range hotels are renovating their sites to improve their offerings and deliver greater value to business travelers through business-friendly services and by creating modern and clean interiors, thus allowing them to compete with higher-end hotels. In turn, higher-end properties are placing an increased focus on delivering superior levels of customer service to ensure traveler satisfaction.

Consolidation, fleet management, and pricing dynamics continue to shape the North American ground transportation market. Recent industry consolidation has posed several challenges for the three key industry players, with some facing excess inventory issues due to a large number of retail vehicles that were acquired during mergers. Base rates and average daily rates are predicted to increase slightly as car rental companies raise prices to remain profitable and continue to push ancillary fees; however, corporate buyers are expected to continue to push back and negotiate their rates, making it likely that rental companies will work with their customers to keep their corporate rates generally flat next year.

North America Airfare, Hotel and Car Rental Forecast

Short Haul Business Class Long Haul Business Class Short Haul Economy Long Haul Economy Mid-Range Hotel Upper-Range Hotel Car Rental Base Rates
2% to 6% 1% to 4% 2% to 5% 1% to 3% 3% to 6% 3.5% to 7% 0.5% to 1%

Source: American Express Global Business Travel Forecast 2015

Latin America

With differing levels of economic growth for countries in the region, Latin America continues to experience conservative growth overall. Increased competition from European and American air carriers looking to expand their service offerings is expected, though airfares are predicted to rise slightly overall. Full service carriers will likely look to raise their prices and profitability, keeping pace with GDP increases. Long-haul rates are likely to rise as the region has experienced less consolidation than others and continues to largely be controlled by full service carriers.

Demand from US companies with manufacturing facilities in Latin America will likely help create a seller’s market and contribute to mid- and upper-range hotel property increases across the region. With reduced supply compared to demand in many cities, prices at business-focused hotels are expected to rise. Heading into 2015, Brazil will continue to stay in the international spotlight in anticipation of its next global sporting event in 2016. However, excitement is somewhat tempered by concerns that there will be a slowdown economically, and prices are expected to remain steady.

In the ground transportation category, slight base rate increases are expected, as specific economies within the region continue to be strong, with international business activities and an increased number of visitors.

Latin America Airfare, Hotel and Car Rental Forecast

Short Haul Business Class Long Haul Business Class Short Haul Economy Long Haul Economy Mid-Range Hotel Upper-Range Hotel Car Rental Base Rates
-1% to 3% 2% to 5% -1% to 3% -2% to 3% 5% to 8% 5% to 7% 1.8% to 2.1%

Source: American Express Global Business Travel Forecast 2015

EMEA Predictions & Dynamics

In 2015, European air prices will likely remain neutral, with the exception of added capacity on transatlantic routes, which may lead to depressed fares in that category. As corporations impose stricter travel policies, short-haul business travel demand appears to be declining slightly, leading some carriers to reduce available capacity for this segment. An increased presence from Gulf carriers will likely keep long-haul rates very competitive, however supply will continue to have a slight effect on the market, as airlines elect to refit or replace existing aircraft to accommodate changes in demand.

Ground transportation rates will likely be flat or slightly reduced in 2015 as a result of increased competition across multiple countries. With key car rental players expanding across Europe, many are focusing heavily on loyalty programs and finding new ways to increase rates through added services. At the same time, rail travel continues to evolve as European legislation and private companies work together to develop initiatives that increase cross-border operations. With high-speed travel accounting for 30 percent of the overall long-distance passenger rail traffic in Europe, additional certain countries within the region are beginning to plan for high-speed rail developments, leading to incremental new capacity.

Outside of Europe, capacity increases will likely cause prices to drop for short-haul business and long-haul economy airfares in the Middle East and Africa (MEA). With economic uncertainty and political challenges largely impacting the Middle East region, hotel price predictions vary greatly from country to country. While still a relatively smaller industry factor in MEA, ground transportation is beginning to grow, with multiple new rental locations through Africa. For example, South Africa and the United Arab Emirates are both predicted to see a one to two percent increase in ground transportation pricing. While this is down from last year, it is still projected to outperform Europe. The demand is primarily fueled by increased travel from foreign drivers.

EMEA Airfare & Car Rental Forecast

Region Short Haul Business Class Long Haul Business Class Short Haul Economy Long Haul Economy Car Rental Base Rates
Europe -5% to -2% -1% to 1% 0% to 2% -1% to 2% -0.9% to 0.6%
Middle East & Africa -2% to 0% -1% to 2% -1% to 1% -5% to -2% 1% to 2%

Source: American Express Global Business Travel Forecast 2015

Hotel rates are predicted to rise slightly in nearly all countries and categories across EMEA, as demand steadies. In 2015, a larger number of cities are expected to add higher hotel-related taxes for travelers, making it more difficult for companies to accurately determine hotel pricing in advance.

EMEA Hotel Forecast

Region Mid-Range Hotel Upper-Range Hotel
EMEA 1% to 6% 0% to 5%

Source: American Express Global Business Travel Forecast 2015

APAC Predictions & Dynamics

Asia Pacific’s lower prospects for economic growth compared to the robust levels of years past will likely impact business travel pricing in 2015 as domestic airfares are predicted to be flat to slightly higher and international fares are likely to experience small declines. Individual country predictions tend to be positive, with variability throughout the region.

APAC Airfare Forecast

Airfare Forecast Type Business Class Economy
Domestic 0% to 2% 0% to 3%
International -1% to 2% -1% to 1%
Intra-APAC 1% to 2% 0% to 2%

Source: American Express Global Business Travel Forecast 2015

While 2015 should be down for Asia Pacific by its own standards, the region’s overall growth should still be relatively solid. Accordingly, hotel rates across the region are expected to rise minimally across most categories in the coming year. One exception is Thailand, a country where recent political turmoil has dramatically slowed inbound tourism. In China, recent efforts to drive austerity measures and crack down on corruption have affected the demand for the luxury hotel market, causing some hotels to request downgrades to their ratings.

APAC Hotel Forecast

Mid-Range Hotel Upper-Range Hotel
0.8% to 3.5% 0.7% to 3.5%

Source: American Express Global Business Travel Forecast 2015

For details on how to purchase the Forecast, which includes many more country-specific insights on airfares, hotel and car rental rates in regions throughout the world, please contact GlobalBusinessConsulting@aexp.com.

About the Global Business Travel Forecast 2015 and Methodology

The Forecast is a key deliverable of Global Business Consulting from American Express Global Business Travel as a part of their EXPERT INSIGHTS research practice. The EXPERT INSIGHTS research practice also produces monthly industry analysis, the Business Travel Monitor pricing index, and detailed travel program best practices and benchmarking reports.

The Forecast is based on a number of primary data sources, including proprietary data from the Global Business Travel Monitor, the American Express Global Business Travel contracted rates database, aggregate transaction data, and secondary data sources including Smith Travel Research (STR) Global Hotel Reviews, Center for Asia Pacific Aviation (CAPA), Airline Weekly and economic data projects from Economywatch.com.

With the 2014 transaction trends and expected global expenditure context in hand, Global Business Consulting subject matter experts consider their recent front-line industry and contract negotiation experiences to predict specific expected price changes by country and region. This Forecast also takes care to make predictions by fare type or classes of service for air and hotel as price changes prove to differ within these variables. All ranges represent forecasted year-over-year changes in negotiated business travel rates.

Although the forecasts and projections provided in the report are based on information gathered from internal and external sources that American Express Global Business Travel believes to be reliable, no representation or warranty is made as to the accuracy of the forecasts or projections made herein. In addition, actual changes in business travel costs could vary significantly from forecasted data, particularly as a result of unforeseen future political, economic, and/or environmental events.

About American Express Global Business Travel
Positioned at the intersection of commerce and travel, American Express Global Business Travel offers its customers a comprehensive network, service dependability, and deep insight to help move people and businesses forward. American Express Global Business Travel provides leading travel solutions, integrated consulting services, proprietary research, and end-to-end meetings and events capabilities. These innovative offerings enable clients to optimize the return on their travel and meetings investments. Learn more at www.amexglobalbusinesstravel.com.

American Express Global Business Travel is part of one of the world’s largest travel agency networks with locations in nearly 140 countries worldwide.

American Express Global Business Travel (“GBT”) is a joint venture that is not wholly-owned by American Express Company or any of its subsidiaries (“American Express”). “American Express Global Business Travel”, “American Express” and the American Express logo are trademarks of American Express, and are used under limited license.