Airfare and hotel rates up, industry making slow rebound

Across the country and in Colorado business travelers are paying more this year than last year for domestic airfare, international airfare and hotel lodging – a positive sign for the travel and hotel industries.

A travel pricing snapshot for second quarter 2011, released this week by American Express Global Business Travel eXpert insights Business Travel Monitor, showed that the average domestic one-way airfare is up 8 percent over second quarter 2010 fares. Domestic and international hotel rates also are up, according to the study.

Colorado room rates are up this year over last year, said Christine O’Donnell, president of Colorado Hotel Lodging Association. However, data from the Rocky Mountain Lodging Report does not delineate leisure and business travel. In Colorado leisure travel is what is carrying the hotel industry, she said.

Colorado room rates are making a slow, methodical assent back to pre-2008, O’Donnell said. In 2010, the average daily room rate was $118.77. So far, this year, the average is $122.77, according to the Rocky Mountain Lodging Report. In the Springs, room rates are up just $3, on average, to $87 over last year.

“Rates are the last thing to come back,” O’Donnell said. “You can keep occupancy up by driving good deals. But, we are looking at 2013 and 2014 for rates to be back to pre-2008 rates.”

Meanwhile, the bumps in room rates across the country are viewed as positive recovery in the hospitality industry. The BTM study found that the average domestic hotel rates increased 3 percent to $156 over second quarter 2010 room rates while international business travelers saw an 11 percent room increase to $258.

As hotel new development pipeline slowed with the uncertainty in the economy, hoteliers have benefited from more favorable demand to supply ratios by and large in 2011,” said Christa Degnan Manning, director at eXpert insights research. “In addition, many hoteliers have renewed focus on the business traveler as this more lucrative sector of travel has picked up.”

As hoteliers have followed the supply trend of offering more fee-based services, savvy sourcing professionals are getting more of those services included with the higher base rates for the business traveler, which helps businesses have more predictability in travel-related costs, Manning said.

With this backdrop, companies should focus their approach to negotiations with hotel suppliers for 2012 to obtain the best overall value, rather than simply the lowest base rate, she said.

Airline tickets for both domestic and international flights have been consistently higher for companies throughout 2011 compared to each respective month in 2010. The year-to-date average fare increase has slowed the last two months, however, suggesting that fares may be stabilizing.

“To some extent (airlines) have been able to raise rates in response to increasing energy costs to try to protect the recent profit margins the industry has generated,” Manning said.

“While rate increases have slowed, it’s highly unlikely average airfares for businesses will decrease in the near future so companies should be preparing to mitigate cost increases through careful contract negotiations, traveler decision support, policy compliance, as well as aligning and defending budgets according to 2012 business plans.”