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Going up: Travel costs to rise in 2007

Tight supply will collide with rising demand next year leading to a jump in travel costs across the board, according to the American Express Global Business Travel Forecast, released on Thursday.

The study predicts a 3 percent to 5 percent increase in global domestic economy fares, and a 3 percent to 7 percent rise in global international business-class fares. Moderate increases are expected as airlines pare back fare hikes, corporations focus on smarter buying and traveler security remains an area of concern, AmEx said.

Indeed, the corporate procurement department will stay busy in the new year. “We anticipate that more organizations will ramp up their procurement focus, implement new technology tools at the point of booking, update and strengthen their travel policies, and focus on traveler behavior to ensure that negotiated savings are fully realized,” said Mike Streit, vice president and global leader for American Express Business Travel, Advisory Services. He added, "We also expect to see a growing number of corporations zero in on corporate meetings spending as this area, until now, has been under-examined and is ripe for savings and control opportunities.”

Skyrocketing demand for hotels across all regions will continue to give hoteliers more control over negotiations, with few downward pressures available to stabilize pricing. Rising occupancy, limited supply growth, and competition between leisure and corporate travelers will "leave hotels with the confidence to increase transient rates," the study reports.

“While the hotel industry will clearly continue to be a sellers' market in 2007, companies that take advantage of their long-term partnerships, negotiate aggressively and monitor program compliance will mitigate these increases and manage hotel spending better than companies that do not,” Streit added.

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