Corporate travel buyers to face a tough negotiating environment in 2006

By EyeforTravel.com Correspondent

The industry is experiencing a fair amount of “de-networking,” where certain managed travel companies are breaking up their ownership and management structures and seemingly curtailing their network’s global reach, says Andy McGraw, senior vice president and general manager, American Express Business Travel.

“Should these companies seek to re-constitute their global capabilities, the investments required will be huge, plus they’ll likely go through a period of disruption. Undoubtedly, all this shuffling of decks sheds new light on the incredible complexity that surrounds the managed travel industry, as well as the people, discipline, process, technology, and infrastructure investments necessary to make the business tick,” says McGraw.

“Conversely, American Express is already a consolidated, global player and some years ago executed the cultural, organisational and platform changes that others are just now beginning. With such integration challenges behind us, we have the unique capability to serve customers in 140 countries and territories through 2,200 travel locations. We can focus our time and investments on our customers, and delivering the world’s only fully integrated travel, purchasing and payment program across a global footprint.”

According to the American Express Business Travel Monitor, which is released on a quarterly basis, average fares paid by our clients for U.S. domestic airfares dropped to a six-year low ($216) at the close of 2005. Conversely, domestic and international hotel, as well as international air, and car rental prices reached new six-year highs.

McGraw says while the drop in domestic airfares is partly due to the introduction of simplified fares and more low-fare competition, international demand is growing as capacity shrinks, so the airlines have grown stricter on sticker prices. “However, clients who maintain large preferred supplier volumes will continue to benefit from better deals down the road,” says McGraw.

“For 2006, however, the pricing trend lines indicate that corporate travel buyers will face a tough negotiating environment across the board -- whether sourcing air, hotel or car-rental inventory. The hotel industry, in particular, is already proving to be a true seller’s market as occupancy growth is outpacing supply in key markets, such as New York and London. Because it’s a seller’s market, there is more opportunity to sell managed travel as a means for locking in savings,” says McGraw.