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Travel Management

 December 02, 2013
American Express Releases Annual Global Business Travel Forecast

 American Express has released the 10th installment of its Global Business Travel Forecast, designed to help corporate travel executives better align their plans and policies to maximize the strategic value of their business travel agreements and investments. The Forecast looks at three key travel sectors - airfare, hotel and ground transportation, and found that local influences within Canada are playing a significant role in determining travel costs next year.

The study revealed that because of budget airlines expanding their US-Canada transborder networks, significant declines in transborder fares are anticipated next year for both the U.S. and Canada. According to the Forecast, low-cost carriers are expected to introduce new premium economy offerings that will likely provide more travelers with an alternative to business class travel and international capacity is increasing, which is all expected to contribute to lowering long haul prices in 2014.

Additionally, carriers with business short haul and trans-border routes are expected to also increase with more products, more capacity, and more routes. In particular, some economy airlines are expected to make new inroads to U.S. destinations while also expanding their fleets. The anticipated growth in low-cost options should force larger airlines to lower their costs in order to compete in this space.

Conversely, travel costs in the ground transportation and hotel sectors are expected to rise. Prices are anticipated to climb by 1 to 1.5 per cent in the ground transportation sector due to rising fleet cost and consolidation, though this is tempered by increased competition. In the hotel sector costs are expected to increase by 2.4 to 6.4 per cent (for both mid-range and upper-range hotels), with local trends in Toronto, Montreal, Quebec, Calgary and Vancouver fueling the rising hotel costs.

"With continued economic uncertainty moving into 2014 and some travel costs on the rise, it is more important than ever for companies to ensure their travel investments are allocated to support the achievement of their overall business objectives," said Colin Temple, Vice President & General Manager of Global Business Travel at American Express Canada.

With the potential for travel costs to reach into the hundreds of millions of dollars for many companies next year, it's more important than ever for companies to adequately plan and manage their travel investments. Formulating an efficient and effective program that aligns with senior leadership can help achieve business priorities to not only help facilitate discussion, but help shift thinking from travel as an expense line item to travel as an investment.

Local Trends

The Canadian hotel industry is defined by a few key cities, each of which is unique in terms of its balance of corporate, event-based and leisure travel.

- Toronto's hotel market is very strong and demand is high for all segments, including the new luxury hotel supply, which has resulted in 3.4 per cent YOY growth YTD 2013. Higher growth projections are also anticipated for 2014.
- Montreal is North America's fourth largest centre in terms of aerospace jobs and is home to several large international air transportation organizations such as IATA, ICAO and SITA. Hotels enjoy a strong contribution from both leisure and meeting business.
- Calgary continues to grow as a services hub for the energy industry, which is directly linked to the strong hotel performance. While in the long term the U.S. plans to develop its energy independence, potentially impacting oil prices and softening demand, in the near term Calgary is facing a continued capacity crunch with new hotel development limited to the airport business community and the University of Calgary.
- Although Vancouver is known for international commerce and trade, mining and forestry, software development and biotechnology, hotel performance is strongly influenced by tourism. Instead of being driven by GDP, hotel prices are actually driven by seasonality and prices typically go up from May through September because of an increased demand from visitors by air and cruise ship arrivals.
- Halifax is the largest city economy in Eastern Canada and continues to do well. Two offshore exploration energy projects and new shipbuilding contracts contribute to the predictions for respectable travel growth in demand and prices.

Global Snapshot

North America

Overall, North American business travelers can likely expect mixed price changes across travel categories in 2014. With minor exceptions, North American airfares are expected to decline in 2014 as a result of heightened competition from low cost carriers, challenging unemployment levels and corporate travel policies becoming more stringent. However, pending consolidation among major U.S. airlines may offset these expected declines.

Predicted hotel rates in North America are expected to climb by 3 to 6 percent; however, the predictions for individual cities are expected to vary widely. Hotel prices in North America's main travel regions will likely continue to grow, but it appears that secondary locations have become saturated with supply and are expected to be more competitive.

Latin America

As Latin America's larger economies slow down after a period of growth, changes in airfare and hotel rates are likely to vary country-to-country. Local economies in Argentina, Brazil and Chile are expected to have the greatest impact on business travel costs in the region in 2014.

Brazil is expected to continue to lead in occupancy levels, and in preparation for a global sporting event taking place in 2014, may also experience additional increases in hotel rates next year.

Europe, Middle East and Africa Region (EMEA)

Companies should expect to pay slightly more overall for business travel in EMEA in 2014, as suppliers likely make adjustments across air, hotel and ground transportation categories, all of which are expected to remain relatively flat or experience slight increases in the region. In response to more competition from a strengthening rail industry, which is expected to improve its business class options, larger airlines are expected to follow the model of low cost carriers.

Hotel rates are expected to increase in nearly all countries and categories in 2014, resulting in an overall prediction of increases in both mid-range and upper-range categories for EMEA.

Asia Pacific Region (APAC)

Driven by China's slower but stabilizing growth, APAC will likely see rate increases across most categories. Individual country predictions tend to be positive, as well; however, as is the case in other regions, considerable variability across the region is expected.

Hotel rates across the APAC region are expected to see rate increases, as the region continues to grow economically and supply is not expected to outstrip demand in most locations. The exception is India, which may experience slight declines.

For details on how to purchase the Forecast, which includes more insights on airfares, hotel and car rental rates in regions throughout the world, visit:

https://businesstravel.americanexpress.com/global-business-travel-forecast

Global Business Travel Forecast 2014 and Methodology

This year marks the 10th anniversary of the American Express Global Business Travel Forecast, which has evolved into a leading global perspective of business travel industry designed to help corporate executives to better align their plans and policies to maximize the strategic value of their business travel investments.

The Forecast is a key deliverable of American Express Global Business Consulting EXPERT INSIGHTS research practice, which 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 American Express Business Travel Monitor, the American Express 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 2013 transaction trends and expected global expenditure context in hand, American Express 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.

www.businesstravel.americanexpress.com