2005 Business Travel Costs Expected to Increase Seven Percent as Industry Recovers
CONTACT: Caleb Tiller | 703-684-0836 ext. 38
Alexandria, VA (October 27, 2004) -- The National Business Travel Association (NBTA) this week provided its members with the NBTA 2005 Business Travel Overview and Cost Forecast, an analysis of what to expect next year in the corporate travel market, including overall costs and rates for air, hotel, car rental and meals. The Forecast indicates that in 2005 the business travel industry will see a recovery to levels seen in 2000.
NBTA forecasts that corporate travel costs will increase by 7 percent in 2005 over the previous year and that the following components of corporate travel will change as listed:
Air travel rates – increase 5 percent
Hotel rates – increase 7.5 percent
Car rental rates – increase 5 percent
Meal prices – increase 3 percent
These rate increases will come in an environment in which corporations are no longer restricting travel as they have in recent years. While many corporations restricted trips to only “essential” or “customer/client-related” travel over the last three years, the October 2004 survey of NBTA member travel managers shows that less than 40 percent are continuing such travel restrictions. Corporations are expecting to increase business activity next year owing to three factors: new efficiencies discovered during the economic downturn, new demand for services as the economy improves, and the expansion of new markets as security concerns wane. The increase in business travel, while good for the economy, could allow travel suppliers to regain pricing power and increase travel costs.
“NBTA is pleased to forecast the recovery of business travel in 2005,” said Carol A. Devine, CCTE, NBTA president and CEO. “Travel managers have used their expertise to contain their companies’ travel costs in recent years. As travel expands in 2005, travel managers will continue to provide value by negotiating the best contracts and setting corporate travel policy to get the best value for each travel dollar in the rapidly changing travel market.”
Air
The airline industry continues to face financial difficulties and works to contain costs. Low-cost carriers have fared well in the market, growing capacity and passenger traffic, and attracting more business travel each year. However, some low-cost carriers are beginning to face the challenges legacy carriers have been working on in recent years, including high labor and fuel costs. While legacy carriers are taking steps to reduce their cost structures, 2005 could see more airlines entering into bankruptcy court protection.
In this environment, and with fuel prices expected to continue increasing in 2005, airlines will continue to work to contain costs and to establish profitable fare structures. NBTA forecasts an increase of 5 percent in corporate air fares.
Hotel
U.S. hotels are raising rates in response to increases in business travel, and NBTA expects corporate hotel rates to increase by 7.5 percent in 2005.
As demand for room nights has increased, hotels have adjusted to offer new services and attract business travel. Upper-scale, mid-scale, and extended-stay hotels have added services or retooled their products to appeal to business travelers. At the same time, hotels have been able to put upward pressure on room rates by exercising pricing discipline. In 2005, supply growth is expected to decline in most major markets, while demand growth increases, driving prices upward.
Car
The U.S. car rental industry is on its way to recovery, as demand for rental cars at airports and local markets grows. At the same time, the largest operating expense for car rental companies, fuel costs, is expected to continue increasing. That increase and other operational costs for car rental firms will be tempered by efforts to contain costs and by intense industry competition. NBTA forecasts that corporate car rental rates will increase by 5 percent.
Meals
Food prices in the United States are rising due to demand, export levels and diet. Restaurant prices are increasing due to higher costs labor, locations and product. Meal prices have consistently increased each year that NBTA has done the annual Forecast, and 2005 is no exception. In 2005, NBTA forecasts that meal prices will increase 3 percent.
The NBTA Business Travel Overview and Cost Forecast is an annual report designed to give NBTA members one source of insight into the state of business travel and expectations for the coming year. The NBTA 2005 Business Travel Overview and Cost Forecast analysis and projections are based on a survey of NBTA corporate travel manager members, industry analyst predictions and other market indicators. At NBTA’s website, NBTA.org, members can download the Forecast and non-members can purchase it. Members of the media can obtain a complimentary copy by contacting Caleb Tiller.
The National Business Travel Association is the source for critical information on the business travel industry. For more than 35 years, NBTA has dedicated itself to the professional development of its members through advocacy, education and training, and networking opportunities. NBTA represents over 2,500 corporate travel managers and travel service providers, who collectively manage and direct more than $170 billion of expenditures within the business travel industry.
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