Airline Suppliers Regain Pricing Power over Business Travelers in First Half of 2010, Reports American Express Business Travel Monitor

National Business Travel Convention – American Express Business Travel, a global leader in business travel management, released its North America Business Travel Monitor (BTM) data and analysis for the first half of 2010, including details of trends in US domestic and international airfare and hotel rates paid this year. Overall airfares have increased substantially versus the first half of 2009, climbing steadily towards pre-recession levels as of June 2010. However, hotel rates have decreased slightly compared to the first half of 2009, but rate changes have varied dramatically based on region. Gradual upticks over the first half of the year with further increases in demand indicate that hotel price declines will likely cease and even begin to rise in the 2011 negotiating season.

"The travel marketplace continues to change quickly as recovery occurs, creating new challenges for both travel managers and business travelers who became accustomed to significant discounts during the recession,” said Christa Degnan Manning, director, eXpert insights research, Global Advisory Services, American Express Business Travel. "Airlines took many steps to position themselves for survival over the past 18 months to strengthen themselves and drive revenues and profitability. With travelers on the road again, air suppliers have gained ground in pricing power and the end of hotel rate drops is likely near. This means companies have to reconsider contracts, policies, and cost-savings tactics that may no longer be relevant.”

Mid-Year 2010 BTM Highlights

Air

In the last year airlines have carefully calibrated capacity to ensure fuller planes and better profitability. This translates to higher pricing for available seats and fewer promotional discounts as travel demand increases. Today average rates are the highest they have been since the first half of 2008. BTM data shows trips to key business hubs around the world have increased indicating the primary contributing factor in the price increases is that business people are on the road again.

Manning continued, "With volume returning, airline alliances and mergers increasing, and increased competition for the airplane seats available, companies need to be more aggressive this year to find the best fares. This also means travelers need to change behavior and be aware of preferred supplier discounts where applicable and to plan ahead more effectively to make sure they get the seats they need at the best price.”

Year-Over-Year Mid-Year International Airfare: Increased 8%

• Mid-Year 2010 Average International Airfare Paid - $1,768
  • Q1 2010 Average International Airfare Paid - $1,726
  • Q2 2010 Average International Airfare Paid - $1,810
• Mid-Year 2009 Average International Airfare Paid - $1,642
• Mid-Year 2008 Average International Airfare Paid - $1,946

Year-Over-Year Mid-Year US Domestic Airfare: Increased 9%

• Mid-Year 2010 Average Domestic Airfare Paid - $233
  • Q1 2010 Average Domestic Airfare Paid - $225
  • Q2 2010 Average Domestic Airfare Paid - $240
• Mid-Year 2009 Average Domestic Airfare Paid - $213
• Mid-Year 2008 Average Domestic Airfare Paid - $247

Travelers Slowly Returning to the Front of the Plane

The BTM data also reports use of business class for international flights has seen a slight increase year-over-year, a positive indication of business travel policies and budgets loosening. However, international business class usage is not nearly as high as traditional levels, reflecting that the "New Normal” of more cost-conscious business travel may be here to stay.

• Mid-Year 2010 International Business Class – 41%
• Mid-Year 2009 International Business Class – 38%
• Mid-Year 2008 International Business Class – 50%

International Destinations Show Uptick in Trip Volume

London, Frankfurt and Paris remain the top traveled to destination spots for US-based business travelers to Europe, with all three seeing notable volume increases in the first half of 2010 from the same period last year. London saw a 24% increase, Frankfurt saw a 30% increase, and Paris saw a 16% increase. In Asia, Tokyo, Shanghai and Singapore remain on top as the most popular traveled to business destinations; year-over-year Tokyo saw a 24% volume increase, Shanghai saw a 68% increase, and Singapore saw a 47% increase in the first half of 2010.

Hotel

Overall business traveler rates paid on average are slightly down year-over-year in 2010. This is due to the very competitive negotiating environment for corporate rates at the end of 2009 for the 2010 contract year. Of note, companies with hotel programs managed by American Express Business Travel’s Global Advisory Services achieved a 9.8% year-over-year average rate reduction in 2010 over 2009 contracts in the last year.

However, the hotel industry rate changes vary by business destination. On the US domestic front, May showed particularly strong average rates. As the first half of 2010 came to a close, commonly traveled to US domestic destinations including Los Angeles, Atlanta, Seattle, and Washington D.C. showed rate increases, albeit in single digits. From an international perspective, June showed the highest average rates so far this year with popular destinations including Amsterdam, Athens, Madrid, Rome, and Zurich seeing notable business traveler average rate paid increases across the second half of Q2.

Year-Over-Year Mid-Year International Booked Hotel Rates: Decreased 2%

• Mid-Year Average International Booked Rates Paid - $230
  • Q1 2010 Average International Booked Rates Paid - $228
  • Q2 2010 Average International Booked Rates Paid - $232
• Mid-Year 2009 Average International Booked Rates Paid - $235
• Mid-Year 2008 Average International Booked Rates Paid - $267

Year-Over-Year Mid-Year Domestic Booked Hotel Rates: Decreased 2%

• Mid-Year 2010 Average Domestic Booked Rates Paid - $149
  • Q1 2010 Average Domestic Booked Rates Paid - $146
  • Q2 2010 Average Domestic Booked Rates Paid - $151
• Mid-Year 2009 Average Domestic Booked Rates Paid - $152
• Mid-Year 2008 Average Domestic Booked Rates Paid - $151

Manning concluded, "As hoteliers have less ability to constrain capacity, we saw strong competition in the last negotiating season to lock in business traveler loyalty with more discounts for 2010. However, travel category managers and meeting planners will need to evaluate destinations carefully when looking at hotels for 2011. While some regions are flat or even slightly down, others are rebounding incredibly strong. Buyers will need to educate themselves on local markets, benchmark rates with peers, and even weigh alternative options to find the most cost-effective options next year.”

About the American Express Business Travel Monitor, North America

The American Express Business Travel Monitor is a key deliverable of American Express Business Travel Global Advisory Services’ eXpert insights research practice. Using US business travel point of sale data, it benchmarks the average prices paid for air, hotel, and car rental service by class of service for hundreds of key business travel destinations globally through aggregate analysis of American Express' extensive database of travel booking and payment information.

The BTM includes both average published and business traveler purchased air fares captured across hundreds of domestic and international routes, including unrestricted first class, business, economy, and discounted, restricted economy air fares. The methodology for the average air fare paid is the one-way price paid by all travelers booked through American Express Business Travel, including taxes and fees, for all routes.

Average booked hotel rates, both international and domestic, represent the total spending of all American Express Business Travel clients, excluding taxes, divided by the total number of room nights confirmed. The full BTM includes hotel averages by major city neighborhoods and category of hotel by price range. The average daily cost for car rentals is drawn from American Express Corporate Card data and includes all charges incurred, including mileage, gas, tax and insurance, divided by the average length of rental. Data for the distribution of rental class categories is drawn from all rentals booked by the entire American Express Business Travel customer base.

About American Express Business Travel

American Express Business Travel (www.americanexpress.com/businesstravel), a division of American Express Company, is committed to helping its clients maximize the return on their travel investment through cost savings strategies, world-class customer service, and greater spending control. With clients ranging from small businesses to multinational corporations, American Express Business Travel provides a combination of industry-leading technology, travel management consulting, and strategic sourcing and supplier negotiation support, alongside global customer service available online and offline. The Company also provides a dynamic online community (www.businesstravelconneXion.com) harnessing the collective intelligence of those in the business travel industry with a variety of perspectives, best practices, current research and industry news.

American Express operates one of the world’s largest travel agency networks with locations in more than 140 countries worldwide. Total travel sales volume in 2009 was $21.5 billion, including proprietary volume, volume processed through joint ventures, and American Express branded volume processed through its partner network.

American Express Company is a global services company, providing customers with access to products, insights, and experiences that enrich lives and build business success. Learn more at www.americanexpress.com and connect with us on www.facebook.com/americanexpress, www.twitter.com/americanexpress and www.youtube.com/americanexpress.