National Business Travel Association Forecasts 2003 Business Travel Costs - Business Travel Costs Expected to Increase 5%

Alexandria, VA - The National Business Travel Association (NBTA) today released its 2003 Business Travel Cost Forecast, which provides a concise look into future business travel costs across several key markets. NBTA predicts that business travel costs will increase 5% in 2003. The forecast, compiled by NBTA research staff, predicts that in 2003:

• Business airfares will increase by 7%
• Hotel rates will increase by 2%
• Corporate car rental rates will increase by 2%

In 2002, increased travel costs, the global economic slowdown, and new security concerns caused corporations to cut spending, tighten travel policies and redefine supplier relationships. In addition, corporations turned to alternative suppliers and new technologies to get the best economic value from their travel purchases.

"Corporations have changed the way they purchase travel," said NBTA President Kevin Iwamoto. "Moving into 2003, our forecast shows that business travel will resume as the economy recovers. Yet overall travel spending will remain flat in the coming year as corporations continue to focus on the bottom line."

Airfare

The nation's top airlines saw passenger traffic decline nearly 10% in 2002, compared to the previous year. Enormous financial losses, caused by this low demand and operational problems, have already resulted in one major airline declaring bankruptcy and are still threatening others. Trying to match lower demand levels, many airlines have cut back on routes, number of flights and aircraft. Yet low-fare airlines like Southwest, Frontier and JetBlue are seeing increased passenger traffic, in part because corporations are looking for cheaper alternatives to the major airlines. In addition, corporations are looking to air charter services and company-owned aircraft as other alternatives to the high business fares offered on the nation's major carriers. The airline industry will face many challenges in 2003, including a slow economy and the possibility of second conflict in the Persian Gulf, which could slow travel even more and raise fuel prices.

Overall, business airfares are expected to rise 7% in 2003. Average business airfare is expected to be $1179.

Hotel

The industry was hurt by reduced occupancy rates in 2002 compared to 2001. Hotels in big cities were affected most by the downturn, with demand in the top 15 markets down nearly 8%. Growth in supply of hotel rooms has slowed over the past year, however, benefiting current suppliers by preventing new competition. While the upper end of the market has been impacted to a larger degree than mid-scale and economy hotels, both the limited-service and full-service hotel segments are expected to move towards recovery in the first half of 2003. However, the battle to retain customers has given corporations more negotiating power, and buyers are seeking longer-term contracts that will keep costs down in 2003.

Overall, hotel rates are expected to increase 2% in 2003.

Car Rental

In 2002, car rental demand rebounded from the low levels seen at the end of 2001. However, car rental firms were hit with the same negative economic conditions as the airlines and hotels. The average car rental rate has risen throughout the year, yet smaller fleets will provide these companies with less revenue. As corporations and travelers have become more price-sensitive about car rentals, they have turned to alternative and economy suppliers. Through cost-cutting efforts and increases in demand, the U.S. car rental industry should see the beginnings of recover in 2003.

Corporate car rental rates are expected to increase by 2% in 2003. The average corporate car rental rate will be $68.

Published by NBTA, the Business Travel Forecast is an annual study that evaluates current and future trends in business travel. To order the study, go to www.nbta.org or call 703-684-0836 ext. 27. Members of the press can receive a complimentary copy of the Forecast by contacting Allison Marble at [email protected] or 703-684-0836 ext. 43.

The National Business Travel Association, established in 1968, represents over 2,400 corporate travel managers and travel service providers. NBTA members manage and direct more than 70% of expenditures within the business travel industry. NBTA is committed to the professional development of its members and offers educational and training opportunities. It is the source for critical information on the business travel industry.