American Express Business Travel’s 2011 Global Business Travel Forecast is out, and the good news is that demand for meetings and business travel is on the rise. The bad news for budgets? Costs are going up, too.

"Throughout 2010, companies have lifted travel restrictions brought on by red bottom-line fears, and this is expected to continue into 2011 as firms look more toward growing the top line. Yet pricing power will swing back to air and hotel suppliers for the first time in two years in 2011 as more competition for limited seats on planes and increased occupancy levels at hotels are expected," stated Christa Degnan Manning, director of expert insights and research, American Express Business Travel, in a press release.

Airfares Take Off
The study forecasts airfare increases in the U.S. and for all of North America of 2 percent to 6 percent in 2011, while international fares will jump 3 percent to 7 percent. In Europe and the Middle East, domestic or short-haul fares will jump 4 percent to 9 percent, while long-haul fares will climb 5 percent to 9 percent.

Several factors are driving the airfare increases, explained Manning at a press conference on October 20. First, demand is rising: In 2010, business travel is up 10 percent, in terms of the number of trips taken, and that trend will continue in 2011. Second, fewer seats are expected to be available because airlines are keeping capacity constrained in an effort to maximize revenues, and the industry is consolidating, with the recent Southwest/AirTran and United/Continental mergers.

Manning pointed out that the airfare projections do not include fees, which have proliferated as airlines unbundle their services. This could mean even higher costs for air travel in the year ahead.

“With fewer promotional fares expected to be available next year, a more likely strategy to reduce air costs will be more advanced booking, to both ensure a lower-priced corporate ticket as well as availability on popular business flights,” said Manning.

Hotel Projections
On the hotel side, the AEBT forecast for 2011 sees rates rising 1 percent to 5 percent in North America at mid-range properties and 2 percent to 6 percent at higher-end hotels. The biggest increases will come in New York, where rates are projected to jump 8.5 percent to 12.5 percent at high-end hotels and almost that much at mid-range hotels.

In Europe and the Middle East, hotel rates will increase 4 percent to 9 percent (mid-range) and 5 percent to 9 percent (high-end). The combination of rising occupancy rates and a weaker development pipeline due to the recession are the main factors driving prices up, Manning said.

Occupancy rates for 2010 are up 4 percent in the U.S., however, average daily rate is down 2 percent, reflecting the many short-term deals hotels have offered to get people into their rooms. Manning does not expect the discounting to continue in 2011. But while rates will rise, they will generally be lower for business travelers than for leisure travelers. “Hotels still want to lock in loyalty with groups,” Manning said. “Corporate negotiated rates will be lower as hoteliers compete for corporate loyalty business and lock in volume business commitments. Companies will likely forfeit a lot of savings when employees book outside preferred agreements and channels and end up paying consumer rates in 2011."

Planners and travelers should also expect much more stringent terms and conditions from hoteliers, such as cancellation and attrition penalties, that may have been overlooked during the recession.

Meetings: Doing More With Less
The AEBT forecast predicts more corporate meeting in 2011, but less spending per meeting as group size decreases and sourcing efficiencies improve. More meetings are expected to be held at the local or regional level and to have fewer amenities, with audiovisual services being the only exception. As planners incorporate virtual alternatives as supplements to face-to-face experiences, investments in these technologies are expected to continue to rise.

For more information on business travel projections for 2011, go to the AMEX Web site.