Study shows travelers pay less as volume falls off

New data from American Express Business Travel show that the falloff in business travel is having a significant impact on the prices that airlines and hotels can command. The company’s latest Business Travel Monitor – a study that looks at the prices actually paid by the company’s business travelers, not the published rates of travel suppliers – carried the headline “Sliding economic conditions definitively shift business travel to a buyers’ market in 2009.” Among the more significant findings:

• The average international air fare paid in the first quarter of 2009 was down 12 percent from the same period a year earlier, while the average domestic fare paid showed a 9 percent drop. (However, the company notes that air fares a year ago – especially domestic fares – did not include many of the separate fees that were tacked on during the big run-up in fuel prices last year.)

• During the first quarter of 2008, business class travel accounted for 50 percent of international airline bookings; in the first quarter of 2009, it was only 39 percent. At the same time, international economy class bookings jumped from 43 percent of the total to 56 percent.

• Average hotel rates paid during the first quarter of 2009 were down 12 percent from the same period a year ago, for both domestic and international trips. The study noted that the biggest price reductions in North America came in the deluxe and budget categories.

Car rental rates did not show a similar pattern, although they didn’t rise significantly either. “Slightly weaker demand in the first quarter of the year has stabilized costs (for rentals) so far this year,” AmEx said. “There was also increased interest in intermediate and hybrid cars vs. larger cars for overall cost control and fuel savings. This reflects adherence to new policies surrounding ground transportation and eco policies.” The trends are working to the advantage of companies that are negotiating new or renewed contracts with travel suppliers, AmEx noted. “For the first time, we are seeing buyers renegotiate greater reduced rates for a longer period of time, in some cases two years. Hoteliers are taking advantage of these rates by reaching out to potential new clients to compete for business,” said AmEx Business Travel vice president Frank Schnur.

Additional indications of an ongoing decline in business travel spending came last week from two other sources. Lodging giant Starwood Hotels reported that its systemwide revenue per available room, or REVPAR, plunged by more than 23 percent year-over-year in the first quarter of 2009. At Starwood’s most expensive brand – St. Regis/Luxury Collection – the REVPAR decline was 34.1 percent, the company said, while at upscale W Hotels it was down 34 percent. Meanwhile, the London-based consulting firm Ascend said it surveyed almost 300 frequent international business travelers – 60 percent of whom usually fly business class – and found that 52 percent said their company’s air travel budget would “drop significantly” over the next 12 months, i.e., 10 to 20 percent or more. In an indication of stricter corporate travel policies, only 20 percent of the respondents said they currently have complete freedom in selecting an airline for their business trips.