2010 Business Travel Forecast: A Mixed Bag

2010 Business Travel Forecast Airfares hold steady while capacity drops. Meanwhile, prices for domestic hotels and car rentals to decrease.

The 2010 travel forecasts are out. No matter how you slice it, it doesn’t look good. Or does it? To give a consultant-friendly answer: It depends.

First, the good news. The National Business Travel Association’s (NBTA) 2010 outlook sees price drops for domestic hotels and car rentals, and anticipates airfares holding steady in 2010. It calculates the average airfare at $299, the price of lodging dropping 2 percent to 8 percent and car rentals dipping 1 percent to 3 percent. The association also forecasts an increase in overall business travel for 2010.

Craig Banikowski, NBTA president and CEO, says as the economic recovery begins taking hold in 2010, when “companies will take advantage of low travel costs to send employees on the road in greater volumes, thus fueling the recovery,” he says. “The up tick in business travel in 2010 will take place within the framework of a new corporate culture in terms of travel. In the ‘new normal,’ we see stronger travel mandates, greater use of pre-trip approval and audits, tighter restrictions on premium class travel, more focus on travel ROI, and enterprise-wide strategic meetings management.”

And American Express, in its 2010 business travel forecast, says it expects mid-range hotels’ s fees to drop 1 percent to 4 percent while those at the upper end will see larger reductions of 3 percent to 6 percent. American Express says New York’s average daily rate would remain flat or decrease by as much as 2 percent for mid-tier properties, and upper-range New York hotel rates would drop from 1 percent to 4 percent. Meanwhile, the forecast predicts rates in San Francisco will fall by as much as 5 percent.
Globally, the numbers shouldn’t be quite as bad. American Express said hotel rates will remain relatively flat except for the Asia-Pacific region, where American Express predicted rate increases of 1 percent to 6 percent.

Meanwhile, airfares will increase around the globe next year as airlines pare their schedules and traveler demand returns, American Express said. Overall, ticket prices will increase by up to 5 percent globally for economy class short-haul flights, and business class long-haul fares are projected to increase by 1 percent to 6 percent. In North America, ticket prices are expected to rise between 2 percent and 7 percent in economy class and 1 percent to 6 percent in business class.

Much of the airlines’ ability to raise prices in 2010, even with demand declines, will come as a result of moves to significantly reduce capacity this year, a process that began early in 2009, the American Express study indicates. Latin America was the only region with predicted decreases in airfares, with domestic rates projected for 3 percent drops.

Even with increased fares, airlines probably will not be able to stay out of the red next year. For 2010, the International Air Transport Association (IATA) predicts airlines will incur net losses of about $3.8 billion. This would be a huge improvement over the $11 billion—$2.6 billion in the U.S. alone—airlines are expected to lose this year worldwide, IATA says.

—Joseph Kornik