SHORT-HAUL air fares from the UK will drop but hotel
room rates will rise, according to an American Express 2005 global
business travel forecast.
The travel management company released its latest annual
forecast this week including, for the first time, predictions for
Latin America and the Caribbean.
Amex predicts business travel demand will outpace supply and
push long-haul air and hotel rates up in the next 12 months.
However, the pace of the industry’s recovery will vary
greatly based on region and country. Director of global consulting
services Matthew Davis said increased competition in markets
including the UK are likely to offset any rise in business travel
costs.
“The business travel industry is certainly in recovery mode,”
Davis said.
Asked about the market for UK airlines, he said: “We see
consolidation and rising prices and we do expect to see fewer
players.”
He advised travel buyers to “lock in (hotel) rates early because
last-minute rates are not going to be there this year”.
Davis predicted low-cost carriers would be forced to raise
short-haul prices in 2005 after fuel costs hit a record $55 per
barrel for the first time this week. He said “typically” low-cost
airlines spent 15%-16% of their total expenditure on fuel.
“But under these conditions we could be seeing these carriers
spending 20%-25% of their total costs on oil and fuel.”
According to Amex, pricing trends will be “volatile” as low-fare
carriers across western Europe continue to drive down prices on
short-haul, domestic and intra-European routes, although it could
not say which routes would be most impacted.
“We are expecting to see the UK lead the way in terms of price
changes.”
Davis said he expected to see fares remain low “for a very long
time”, but predicted they would increase by the end of next
year.