Buyers beware

Hoteliers should hold the balance of power during contract negotiations next year, according to one of the world's largest travel management companies.

Research conducted by American Express Business Travel (Amex BT) found that average hotel rates in the US had fallen year-on-year during the first half of 2010.

But the TMCTravel Management Company: An agency which manages business travel for a company. said steadily increasing demand - especially in the group meetings sector - might give pricing power back to hotel suppliers by the first quarter of next year.

The TMC released the findings of its latest Business Travel Monitor (BTM) for the North American market at the National Business Travel Association convention in Houston.

Christa Degnan Manning, a director in global advisory services for Amex BT, said the fall in hotel rates would soon cease and rises would arrive in time for the 2011 negotiating season.

"The travel marketplace continues to change quickly as recovery occurs, creating new challenges for both travel managers and business travellers who became accustomed to significant discounts during the recession," she said.

"Airlines took many steps to position themselves for survival over the past 18 months to strengthen themselves and drive revenues and profitability.

"With travellers on the road again, air suppliers have gained ground in pricing power and the end of hotel rate drops is likely near.

"This means companies have to reconsider contracts, policies, and cost-savings tactics that may no longer be relevant."

In the last year loss-making airlines across the globe have been stripping out capacity in order to bring supply back in line with demand, pushing the price of an airline seat back up.

While a number of airlines have recently reported continued losses, especially in Europe, results were far better than those forecast by industry analysts.

Average airfares are now believed to be as high as they have been since the first half of 2008, according to the BTM.

Manning said: "With volume returning, airline alliances and mergers increasing, and increased competition for the airplane seats available, companies need to be more aggressive this year to find the best fares.

"This also means travellers need to change behaviour and be aware of preferred supplier discounts where applicable and to plan ahead more effectively to make sure they get the seats they need at the best price."

The BTM data reported use of business class for international flights has seen a slight increase year-over-year, an indication that business travel policies and budgets loosening.

However, said Manning, international business class usage has not been not nearly as high as traditional levels, reflecting that the "New Normal" of more cost-conscious business travel may be here to stay.