Suppliers To Gain More “Pricing Power” In Biz Travel, Sez AmEx Report

Suppliers are set to gain more “pricing power” next year placing more cost pressure on corporate travel managers and corporate travel agencies, according to the American Express Global Business Travel Forecast 2015.

 “Overall, with persisting economic uncertainty in specific regions and countries, the balance of power is expected to shift back to suppliers, thus putting additional cost pressures on travel managers responsible for optimizing travel spend and in working with their travelers to do so,” said Pedro Paredes, vice president, Global Business Consulting.   

“In this environment, organizations and their travel managers will need to be extremely disciplined in defining their travel objectives in relation to their corporate strategy and enforcing the related travel policy,” he added.

Across the board increases
Globally, air, hotel and ground transportation prices are expected to be neutral to slightly higher, according to the report.

However, given the improving U.S economy, North American business travelers can expect price increases across all travel categories next year.

With the airlines’ capacity control along with the recent consolidation of the domestic air market, airlines are predicted to raise both short- and long-haul fares. Inventory controls will likely improve carriers’ yields, resulting in fewer seats in lower fare classes on busier routes.

Hotel rate hikes
North American hotel rates are also expected to rise given economic growth, increasing demand and a lack of new inventory, the report said.

“North American hotel rates are predicted to trend upwards in 2015, buoyed by these noted factors,” Paredes said.

“After an extended period of relative weakness, hotels are looking to capitalize on favorable market dynamics to increase profitability,” he added.

The price increases are predicted across the region but the degree of increases will vary significantly from city to city.

“Moderate and upscale hotels are exploring ways to further differentiate themselves from the competition,” according to Paredes. “Mid-range properties look to renovate their sites and improve their offerings and high-end properties look to deliver higher levels of customer service.”

Push back on car rental rates
A slight hike in rates is also anticipated for car rental companies as consolidation, fleet management and pricing dynamics shape the North American ground transportation market, according to the report.

Corporate buyers, however, are likely to continue to push back and negotiate their rates, with the result that rental companies will work with customers to keep corporate rates flat next year.