Business Travel News - September 8, 2008 - (Page 10)

BTN RESEARCH Corporate Buyers To Face Whopping 2009 Airfare Hikes BY JAY BOEHMER Average airfares this year have done nothing but rise, and the industry consensus is that the trajectory will continue through the fall, winter and throughout 2009—leaving companies, even those expecting to take fewer business trips next year, to budget more for each air trip they will take. As carriers cope with historically high fuel costs and have better positioned their pricing power with large-scale capacity cuts, the bulk of which take hold in the latter half of 2008, airfares are poised to continue dramatic upward movements. Carlson Wagonlit Travel in a late August forecast said the cost of domestic airfares is likely to rise by up to 12 percent in 2009, while international airfares are expected to increase between 16 percent and 20 percent. CWT is attributing that significant growth to rising airline fuel costs, additional fees and surcharges, capacity cuts and more general economic factors. Though BCD Travel has yet to release its own forecast, due this fall, Bob Brindley, vice president of Americas for Advito, BCD’s consulting division said travel buyers should prepare for airfare increases. “If oil stays consistent where it is, higher fares are a safe bet, especially with a lot of the other things happening on mergers and acquisitions front and capacity reductions,” Brindley said. “All those things point toward prices not coming down. I have seen a lot of clients looking at potentially controlling their volumes, but because of price increases, they may still end up spending as much as they spent last year.” That is the thinking on airfares at BearingPoint. Travel manager Laurie Manning noted, “I have a rising commodity on my hands and I will have to take that into my considerations and benchmarks.” “Companies will have to budget more for airline tickets—that direction is a safe recommendation, as airlines think about ways to offset this increase in operating costs from fuel, which accounts for 40 percent of their operating costs,” said Herve Sedky, American Express Business Travel Global Advisory Services vice tic purchases were discounted coach fares, showing “that more travelers purchased tickets in advance.” He said advance purchases could save companies up to 17 percent on domestic fares, noting that companies that shifted from a 7-day to a 14-day HOW WILL YOUR COMPANY’S 2009 advance purchase policy saved on TRAVEL BUDGET COMPARE WITH average $49 per segment. THIS YEAR’S TRAVEL BUDGET? Though travel expense reductions often are among the Decrease more than 10% 9% first levers senior Decrease 6% to 10% 8% management pulls to reduce costs, some Decrease 1% to 5% 10% companies are keepRemain flat 31.% ing their sights on the Increase 1% to 5% 23% purpose of travel: to P PLANNER cultivate revenue. Increase 6% to 10% 12% ConocoPhillips Increase more than 10% 7% travel manager Allen Plumley said the amount of travel at companies Source: Topaz International survey of 157 travel buyers “is so tied to the business.” As an energy company, Plumley said, “We’re growing our budgets and will president and general manager. “As be traveling more.” corporations start to feel the impact ConocoPhillips’ 2007 U.S. booked of the reduced capacity, the supply air volume was $50 million, and and demand will be such that, obviPlumley expects that to grow to $60 ously, fares will go up. Moving formillion this year and continue upward, I predict there will be different factors that impact the increase of ward into 2009. fares. I think supply and demand will Booz Allen Hamilton travel manmake an even bigger impact than ager Jack Lever agreed. “When the cost of fuel.” there’s growth in the business, Domestic airfares during there’s growth in travel, and the second quarter this year that’s the nature of the beast: HOW WILL THE NUMBER OF TRIPS YOUR COMPANY reached a seven-year high, We travel because we’re a TAKES NEXT YEAR COMPARE WITH 2008? increasing 10 percent over consulting company,” he said. the same period last year, ac“We’re anticipating not only cording to American Express employment growth, but T&E Decrease more than 10% 10% client data pulled for its quargrowth.” Decrease 6% to 10% 10% terly Business Travel MoniStill, American Express’ Decrease 1% to 5% 17% tor. Meanwhile, average oneSedky said many companies way international airfare are growing more strategic in Remain flat 29% reached the high-water mark the ways they spend their Increase 1% to 5% 21% for the second quarter since travel dollars. Increase 6% to 10% 9% American Express began “Companies are looking at measuring such data in 1999, travel in a slightly different Increase more than 10% 5% way—they’re looking at travgrowing 11 percent from the Source: Topaz International survey of 157 travel buyers el as an investment,” he said. same period last year. “Instead of worrying as much American Express said its clients paid on average $260 per way ment, it’s about how you stretch this about the specific cost of the airline for domestic tickets—$24 more than dollar and take it further. Advance trip and all the related costs of sendthe second quarter this year com- purchase is a great way to do this. ing someone to a particular destinapared with the same period in 2007. The other trend is down-trading,” tion, they’re looking at this, and askOn the international front, exit- he said, regarding business class us- ing, ‘How do we know this is a good use of investment dollars?’ ” North America fares to other regions age among corporate travelers. Sedky said 89 percent of domes■ jboehmer@btnonline.com ■ averaged $1,980. Though International Monetary Fund chief of transportation Caro Cook acknowledged the organization continues to tighten its travel budget, she confirmed what travel buyers have seen witnessed this year and expect to continue into next: “The cost of airfares is only going up.” Though companies are faced with rising air prices, Sedky and others noted several tactics companies can implement— and have already put in place—to soften the blow. Carlson Wagonlit BUDGET Travel in its forecast report said preferred supplier adoption, advance airfare purchases and use of restricted airfares, among other methods, yield corporate travel savings. American Express’ Sedky said corporate clients increasingly are enforcing advance purchase policies and encouraging travelers to trade down to economy tickets. “Advance purchases in most instances, though not in all, yield savings,” Sedky said. “When companies are looking at this return on invest- 2009 $ 10 Monday, September 8, 2008 www.BTNonline.com Business Travel News http://www.BTNonline.com

Table of Contents for the Digital Edition of Business Travel News - September 8, 2008

Business Travel News - September 8, 2008
Contents
Inside Track
Profiles In Travel Management
BTN Research
Aviation
Meetings Today
Lodging
Asia/Pacific
Washington Wire

Business Travel News - September 8, 2008