Egencia Releases 2009 Forecast and First Negotiability Index for Business Travel
BELLEVUE, Wash., Nov. 10 2008 - Egencia™ today released its 2009
Business Travel Forecast and announced its first negotiability forecast for
2009. Egencia’s forecast evaluated the current economic situation and its
impact on the supply outlook for business travel. Focused specifically on 20
top domestic and international business markets, the forecast analyzes past
and current industry trends, macroeconomic factors, in-depth research of
supplier markets, and capacity forecasts for 2009. The report goes beyond
wide generalizations to include market-level data on air, hotel and car
rental trends and reports on both domestic and international markets.
Egencia’s Negotiability Index captures market-level data and dynamics,
offering business decision makers a single, integrated metric reflecting
trends in key domestic US cities.
“Based on our analysis, in 2009, we expect to see a moderation in business
travel pricing in these 20 key markets,” said Rob Greyber, senior vice
president of North America for Egencia. “While there is notable pressure
that could drive costs higher, we still expect that shrinking demand combined
with a number of other factors will cause average airline ticket prices (ATP)
and hotel average daily rates (ADR) to remain flat to slightly down for
businesses and business travelers in these important business cities.
Because times like these demand attention to details beyond broad averages,
Egencia has provided our clients, partners and the industry with a
market-level look at trends we’re seeing.”
See charts below for Egencia’s breakdown of anticipated changes in average
ticket prices and daily rates in 20 top domestic and international business
markets, along with Egencia’s Negotiability Index for 2009 for domestic US
cities.
Air Outlook: ATP - U.S.—For these domestic markets, average air ticket
prices paid by business travelers in 2009 are expected to be flat to slightly
down due to softening demand, which may outstrip decreased capacity. Policy
and spend controls will continue to tighten at companies which in turn will
impact the mix of products purchased in 2009.
It is also likely that key business markets will experience less capacity
compression than average because airlines want to hold share among business
travelers. Additionally, some markets may even enjoy a level of increased
competition from newer market entrants or even added capacity which could
further moderate ticket prices.
“There are a number of factors at work here for corporate travel market in
air,” continued Greyber. “We are seeing upward pressure resulting from
decreases in capacity, higher a la carte fees such as meals and baggage, and
flow-through from 2008 M&A activity. At the same time, we see corporations
adapting their policies, increasing their cost monitoring (for example,
pushing travelers to lower classes of service) along with overall lower
projected demand and declining oil prices. Overall, we believe decreased
demand may outstrip projected capacity cuts and, as airlines strive to keep
planes full, we expect to see lower average ticket prices for business
travelers in most markets.”
Market ATP in 2009 Denver -9% to -13% Los Angeles -2% to -6% Phoenix -3% to -7% San Diego 0% to -4% San Francisco -1% to -5% Seattle -10% to -14% Market ATP in 2009 Atlanta -12% to -16% Boston -7% to -11% New York -8% to -12% Philadelphia -6% to -10% Washington, DC -7% to -11% Market ATP in 2009 Chicago 0% to -4% Dallas -8% to -12% Houston -6% to -10% Minneapolis/St. Paul -8% to -12% *All tables above are broken out by country region.
Air Outlook: ATP - International—These international markets will be
affected by the same supply and demand dynamics as in domestic markets along
with slight upward pressure if the U.S. dollar continues to strengthen and
companies expand international travel year-over-year.
Market ATP in 2009 Hong Kong -13% to -17% London -4% to -8% Paris -11% to -15% Tokyo -10% to -14% Toronto -11% to -15%
Hotel Outlook: ADR - U.S.—While many key business markets will remain
strong, broad demand is predicted to decline putting pressure on hotel rates.
Additionally, factors such as air capacity cuts will bring fewer business
travelers to some markets and add to downward pressure in pricing.
“While air capacity cuts are not likely to significantly affect important
revenue-generating, business markets, we still believe there will be a weak
to moderate impact on hotels in certain cities,” continued Greyber. “Property
development investments, which was fueled by previous market strength, are now
coming online and will result in an increase in hotel capacity. This should
increase further price competitiveness and downward pressure.”
Market ADR in 2009 Denver -2% to -6% Los Angeles -3% to -7% Phoenix -7% to -11% San Diego -6% to -10% San Francisco -1% to -5% Seattle -1% to -5% Market ADR in 2009 Atlanta -2% to -6% Boston 0% to -4% New York -6% to -10% Philadelphia -4% to -8% Washington, DC -4% to -8% Market ADR in 2009 Chicago -8% to -12% Dallas -2% to -6% Houston -3% to -7% Minneapolis/St. Paul -2% to -6% *All tables above are broken out by country region.
Hotel Outlook: ADR - International—International markets will experience
some weakening demand with rates staying relatively flat to slightly
decreasing. The effect of a strengthening dollar may drive a mild increase
in US travelers to Europe, year over year.
Market ADR in 2009 Hong Kong 2% to -2% London -2% to -6% Paris 0% to -4% Tokyo 0% to -4% Toronto 4% to -1%
Supply Outlook: Car Rental— In addition, Egencia also analyzed the rental
car industry, forecasting next year’s environment to be slightly favorable to
buyers due to factors including expected demand declines because of the
overall economy. That favorability could be offset by capacity reductions
and industry consolidation among car rental suppliers.
Supply Outlook: Negotiability—Egencia has released the first ever
Negotiability Index, an indicator of the overall supply landscape in top
domestic markets. The Negotiability Index analyzes a number of market
factors including macroeconomic factors and expected air and hotel capacity
and occupancy trends.
“With current volatility in the market, we wanted to provide the industry
with actionable analysis of expected conditions in important business
markets,” said Greyber. “Clients and suppliers would normally have to piece
together this sort of analysis in a vacuum. Egencia’s Negotiability Index
should offer a meaningful way to baseline expectations as clients and
suppliers look for ways to drive value in 2009.”
Companies should expect to see these market-level dynamics to persist into
2009.
Survey Results—Travel Buyers
Egencia’s report also included results from a survey of approximately 200
financial executives and decision makers and 500 business travelers. This
survey focused on the latest actions companies are taking to control their
travel spend in 2008 and into 2009. The survey was conducted during the week
of October 13, 2008 and represents a current view of travel buyer and business
traveler views of current year and 2009 dynamics.
According to Egencia’s survey of travel decision makers, it indicates that
the economic downturn has resulted in companies altering their travel spend.
Almost half of companies (48%) are now either slightly or significantly
reducing their travel spend with an equal 48% keeping their current budget
stable. Looking into 2009, 62% expect their travel budgets to remain the
same, 11% expect a reduction and 27% an increase in their 2009 travel
budgets.
“With the current economic situation, we see travel decision makers and
financial executives leaning into the market and actively controlling their
travel spend,” said Rob Greyber, senior vice president of Egencia North
America. “Companies are reexamining travel policies, travel policy compliance
and also employing tactics like unused ticket tracking and stepping up
monitoring spend in real-time to keep travel buyers informed. Taken
together, these actions will allow companies to manage purchasing power, make
better decisions and make their travel budget more effective in the coming
quarters.”
Egencia found that travel decision makers are using specific cost-cutting
practices to control travel spend and manage travel programs more closely
heading into 2009, including:
- Adjusting guidelines around booking tickets in advance (55 percent
of respondents).
- Actively tracking unused tickets (44 percent) and requiring pre-trip
approval (43 percent)
- Encouraging travelers to book a lower class of air service (25
percent)
Survey Results—Business Travelers
Business travelers are also experiencing moderate effects due to the current
economic climate. Business travelers were nearly evenly split on expectations
for 2009 as fifty-three percent said their company’s business travel had
remained the same with an almost equal number (47%) noting that they expect
slightly or significantly decreased travel.
While 65% of business travelers say they have not yet seen their company
update or change travel policies, many are feeling the impact and making the
following changes:
- Taking day trips rather than overnight stays (16 percent)
- Sharing cabs or rental cars (15 percent)
- Renting compact/economy cars rather than larger vehicles (14
percent)
Research Methodology
Projections are based on the statistical analysis of the past and current
industry trends, macroeconomic factors, research of supplier markets, and
vendors’ capacity forecasts for 2009. Smith Travel Research (STR) and OAG
filings were leveraged for a market-level analysis of both Lodging and Air
capacity.
The Negotiability Index is based on data including actual 2008 occupancy &
capacity changes, along with forecasted trends and ADR projections at a
market-level for key business markets.
As indicated above, the projections are based on information gathered from
various internal and external sources. The forecast represents an opinion
based on current market factors and is not a representation or warranty as to
the accuracy of the forecasts or projections made herein. Actual changes in
ticket prices and hotel rates could vary significantly from forecasted
numbers, impacted by unforeseen future economic and political factors.
About Egencia, an Expedia, Inc. Company
Egencia is the fifth largest travel management company in the world. As part
of Expedia, Inc., (NASDAQ: EXPE), the world’s largest travel marketplace,
Egencia helps business get ahead by offering the only truly integrated
corporate travel service. Egencia’s industry expertise and the partnerships
the company has built help drive results that matter, delivering meaningful
advancements that have a real impact. By combining a powerful offline and
online service, Egencia delivers a complete corporate travel offering
supported by global market expertise and a best-in-class technology platform.
For more information, go to Egencia.com.
Egencia and the Egencia logo are trademarks of Expedia, Inc. in the U.S.
and/or other countries. Other logos or product and company names mentioned
herein may be the property of their respective owners.
© 2008 Egencia, LLC. All rights reserved. CST# 2029030-40, 2083922-50.
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SOURCE: Egencia, an Expedia, Inc. Company
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