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Expect crowded airplanes, higher hotel rates in 2007

Rising costs may also prompt firms to tighten travel rules. It adds up to no fun on the road.

December 09, 2006|James Gilden | Special to The Times

For business travelers, 2007 is not shaping up to be a happy new year.

Hotel room rates and airfares will be higher and planes will be more crowded as more business travelers take more trips, experts say. Companies, meanwhile, are expected to tighten employee travel rules.

The news is enough to make even the most grizzled road warriors want to cash in their frequent flier miles for a year on the ground.

"There are a lot of factors converging in the travel industry this year," said Mike Streit, vice president for global advisory services for American Express Business Travel, a unit of New York-based American Express Co. that does an annual global business travel forecast.

Planes are already flying nearly full as airlines have cut the number of aircraft on domestic routes to increase profitability.

This year through August (the most recent data available), 80.4% of all seats on planes were occupied, according to the U.S. Transportation Department's Bureau of Transportation Statistics. That is up from 78.4% for the same period in 2005. The number of available seat miles (a measure of airline capacity) was down for the period -- even as the number of fliers was up.

If airlines do not increase the number of planes flying, business travelers can expect even more crowded planes in 2007. And we'll be paying more for the privilege. Airfares are predicted to rise as much as 7% in 2007, according to the forecast.

The outlook is equally grim for hotel prices, according to the American Express forecast. Rates will increase as much as 8% in the coming year, with even higher rates expected in large cities with strong business travel such as Boston, Philadelphia and San Francisco.

New York, with rates already in the stratosphere, will see increases of as much as 18%. For travelers to Asia, rates at mid- and upper-range hotels will be up as much as 25%.

A strong economy and higher wages in India are helping to fuel the hike in hotel rates for Asia, Streit said. Foreign business travelers are competing with Indian business travelers for hotels, creating more demand than there is supply.

Hotel prices are being driven globally by an increase not just in business travel but also in leisure travel.

"Demand from the leisure traveler is creating an environment where hotel operators are making some very strategic decisions about the capacity they allocate to these two groups," Streit said. Fewer rooms are being allocated for corporate negotiated rates, as hoteliers can fill them with higher-paying leisure travelers.

Business travelers, of course, must travel regardless of the cost.

"When business is up or when business is down, people are still on the road," said Suzanne Fletcher, director of travel and meetings for Federal Way, Wash.-based Weyerhaeuser Co., which counts about 8,000 business travelers among its employees.

"If business is down, you want your sales guy on the road. When business is up you've got everyone else out there."

Fletcher is also president and chief executive of the National Business Travel Assn., a Washington-based education and lobbying group that has its own view about what 2007 holds for business travelers.

In its annual forecast based on a survey of corporate travel managers, the association found that 87% expected to spend more on travel in 2007 than in 2006. But it's not just because of increased costs. Two-thirds said their travelers simply would be on the road more than this year.

Companies are likely to monitor employee travel more carefully. Three-quarters of those surveyed said they anticipated stricter enforcement of travel policies in 2007.

One in five managers surveyed plan to reduce the number of preferred airlines on which corporate travelers can book. This would allow them to concentrate their business with fewer carriers and get greater leverage in negotiating fares.

Many corporate travelers can also expect to find themselves in less comfortable hotels in 2007. Three-quarters of travel managers surveyed said they were booking fewer luxury hotels in favor of mid-class properties, continuing a trend seen in the surveys for several years.

It's enough to foment revolution.

"As travel becomes more of a hassle, we'll see more and more business travelers say, 'I want a decent hotel,' " said Terry Trippler, an airfare expert with MyVacationPassport.com who has been monitoring the industry for 38 years. "You're the one that's away from home and it's not fun, and you deserve a nice place to stay.

"Companies can crack down but travelers will eventually revolt, and business travelers always end up winning."

Trippler is a contrarian on airfares. After predicting that fares would be up 10% to 15% in 2006, which he says they largely were, he believes that with Delta Air Lines Inc. and Northwest Airlines Corp. poised to exit bankruptcy, there could be more available seats in the air and that rates will be flat in 2007.

He even thinks there might be a return to the days of fare wars in select markets as the so-called legacy airlines go head-to-head with low-cost carriers in new markets.

"I believe the low-cost carriers are in for the fight of their life," Trippler said.

Maybe he'll be right. But regardless of whether 2007 brings higher fares, fewer choices and more crowded planes, we will manage to cope, said Fletcher of the business travel association. "There is no one more resilient than the corporate traveler."

james.gilden@latimes.com

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