amex global business travel forecast

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2008 GLOBAL BUSINESS TRAVEL FORECAST

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TABLE OF CONTENTS

Foreword 1

Business Travel & the Environment Forecast 2

Policy Forecast 6

Compliance and Change Management Forecast 8

Meetings Management Forecast 9

Corporate Travel Online Program Optimization Forecast 12

Global Airfare & European Rail Forecast 17

Global Car Rental Forecast 23

Global Hotel Forecast 26

THE FORECASTS AND PROJECTIONS PROVIDED IN THIS REPORT ARE BASED ON INFORMATION

GATHERED FROM A NUMBER OF DIFFERENT INTERNAL AND EXTERNAL SOURCES AND AMERICAN

EXPRESS MAKES NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF

ANY FORECASTS OR OTHER INFORMATION CONTAINED IN THIS DOCUMENT. IN ADDITION, ACTUAL

CHANGES IN BUSINESS TRAVEL COSTS COULD VARY SIGNIFICANTLY FROM FORECASTED DATA,

PARTICULARLY AS A RESULT OF UNFORESEEN FUTURE POLITICAL, ECONOMIC AND/OR ENVIRONMENTAL

EVENTS. ALL RANGES REPRESENT FORECASTED YEAR-OVER-YEAR INCREASES.

© 2007 American Express Company. The content contained in this document is the property of American Express. No part of this publication may be copied or reproduced without the prior written consent of the owner.

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Welcome to the 2008 American Express Global Business Travel Forecast. We provide this forecast to helptravel managers and procurement professionals understand the trends impacting business travel in thecoming year. It is also a valuable resource in aiding the identification of strategies to manage and controlthe cost of their travel and entertainment budget.

Reflecting on the industry in 2007, we know that airlines operated at full capacity levels, flight delays peakedand hotels remained at record-high occupancy levels. The cost of business travel continued to escalate andcorporations were further challenged to find new ways to keep T&E budgets in check while keeping theirtravelers on the road. Throughout this last year, many of you followed our recommendations from the 2007Forecast, which helped you manage and offset price increases while sustaining robust T&E programs.

Based on the industry knowledge and experience of our Advisory Services consultants, our research andtrending indicate that continued demand for business travel, without a commensurate lift in supply, willbring many of the same challenges in 2008. Further, driven by the push toward globalization, we forecastthe greatest pricing pressure will be found in international, demand-heavy markets like China and India. Ourresearch also confirms that opportunities still exist to control expenses and achieve savings despite therising costs.

Looking toward 2008, the trends and strategies we see gaining momentum for optimizing T&E budgets include:

• Travel and related business services will continue to move to a centralized area under procurementwith a particular focus on consolidating corporate meeting and event spend.

• Policies will go beyond travel to be inclusive of total travel and related business services andentertainment expenses.

• Pre- and post-trip auditing and point-of-sale tools will become a more popular and effective means toimprove policy compliance.

• Corporate social responsibility will increase its attention to the well-being of travelers andresponsible business travel.

• Changed management strategies will proliferate as fiscal responsibility becomes a shared effortbetween T&E buyers and travelers.

For nearly two decades, American Express has published the annual Global Business Travel Forecast offeringperspective into industry market trends while providing actionable recommendations to arm you with strategiesfor success. This year’s report builds on that tradition and as you review it you will find we offer overviews,forecasts and trends, as well as suggestions for “What Can Travel Buyers Do?” We are confident this reportwill be a valuable resource and reference guide for 2008.

Sincerely,

Michael R. StreitVice President, Advisory ServicesAmerican Express Business Travel

FOREWORD

1© 2007 American Express Company. The content contained in this document is the property of American Express. No part of this publication may be copied or reproduced without the prior written consent of the owner.

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BUSINESS TRAVEL & THE ENVIRONMENT FORECAST

Corporate Social Responsibility (CSR)Overview

The travel marketplace has fundamentally changed inthe past decade. Deregulation and liberalization haveresulted in the rise of low cost carriers and morecompetitive pricing, while technology and the Internethave made online self-booking and more consumer-centered products possible. This has createdunprecedented opportunities for companies to takeownership of their T&E policies and practices.

Until now, companies have mainly used this newly-acquired power to leverage better deals from airlinesand other travel suppliers, with the needs ofshareholders primarily in mind. With the emergence ofcorporate and social responsibility agendas, companiescan now use T&E policy as a tool to achieve widerobjectives that meet the needs of other stakeholdersand the wider community. Increasingly, corporate T&Epolicies are now being created that specifically addressclimate change and other CSR issues.

Now, more than ever, customers are requiring thatsuppliers have CSR practices in place, and thosecompanies that do not are seeing an increasing potentialfor lost business. CSR-focused companies are alsolooking to align with other companies that have similarvalues and practices in place. This is also evident withthe individual consumer. An increasing number ofconsumers are making their purchasing decisions basedon a company’s CSR practices. As a result, a growingnumber of companies find it necessary to make CSR astandard way of doing business.

CSR has begun to influence the basis for procurementdecisions as well. Historically, procurement decisionshave been based on cost of goods and servicesprovided and quality of goods and services provided. Athird area, the social and environmental impact ofgoods and services provided, is now a growing trend.This is referred to as the Triple Bottom-line Approach.

Triple Bottom-line Approach

The role of CSR continues to increase within thebusiness world as companies take more responsibilityfor the impact that an organization’s activities has oncustomers, employees, shareholders, communities andthe environment. Companies are voluntarily taking stepsto improve the quality of life for employees and theirfamilies, the local community and society at large.

2008 Trend: Corporations Take Action to Incorporate

CSR into Business Travel Programs

American Express Business Travel recognizes andsupports our customers’ increasing interest in CSR aswell as their decisions to bring CSR into their businesstravel programs. We have seen an approximate 300%increase in interest on this topic specifically within thepast 12 months throughout Europe and North America.

During this time period, the majority of activity with ourclients has been about education on the topic and itsrelationship to business travel. However, that trend isnow changing as clients have begun to understand theimportance of this topic and are starting to take action.We anticipate this trend to continue and furtheraccelerate through 2008.

American Express believes that our clients’ true oppor-tunities to reduce carbon emissions are through policyand program management strategies with regard to


StakeholdersHealth & Well-Being

Safety & SecurityDuty of Care; Environment

Cost/Benefits

Return onInvestment

Service/QualityRelevanceCompliance

RESPONSIBILITY


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carbon offsetting. Many of our clients are now measuringthe carbon emissions caused by business travel andsome are even taking the next step to put in placestrategies that will reduce their business travel programcarbon emissions. We believe that education will remaina key consideration as this topic continues to evolve.

American Express sees similarities between theinterest in the environment and business travel todaycompared to the introduction of online booking tools 10to 12 years ago. Customers are expanding theirknowledge base on this topic as emerging technologiescontinue to enter the marketplace. They aredetermining the impacts and benefits that integratingenvironmental initiatives into their business travelprogram will have on their company and travelers.

2008 Trend: Air Travel and the Environment

The environment is a vital component of CSR, andcompanies are increasing their interest in how they canreduce their impact on the environment. Historically,companies have focused their environmental efforts oninitiatives related to facilities—recycling, waste, energy and

water reduction. Now, companies are broadening theirefforts to understand their total company ‘carbon footprint’or, in other words, the amount of Greenhouse Gases(GHG) emitted into the environment by the company.

As this topic grows in interest, companies arestruggling to understand how they can reduce carbonemissions while still increasing company profits.Companies that practice responsible business travellook at economic costs, but also undertake a duty ofcare toward their travelers’ safety, security and health.They also consider the needs of the environment.

Air travel is big business, and it is getting bigger.According to the International Air Transport Association(IATA), passenger numbers now exceed 2 billionannually, and kilometers traveled are projected to reach4.2 trillion in 2007. Plus, aircraft generate high levels ofCO2 emissions—a fully laden Airbus A380 is equivalentto a nine-mile line of road traffic. Yet aviation as a wholeaccounts for less than 5% of total global emissions, andbusiness travel is responsible for less than 50% ofaviation’s impact. Given these statistics, some


What does ‘Responsible Business Travel’ mean?

‘Responsible Business Travel’ is the concept thatcompanies procure and maintain a business T&E policywith more than economic cost as the sole measure.Companies who practice ‘Responsible Business Travel’undertake a duty of care towards their travelers’ safety,security and health, as well as the needs of theenvironment and society at large. Expect to hear thisphrase often and with growing conviction.

Enlightened executives recognize that disregarding thesocial and environmental impact of their activities is nolonger acceptable, and that failure to take positive actionmay carry a heavy cost in economic and reputation terms.This is why companies are starting to tackle the theme ofresponsibility at a corporate level and are ensuring that itis high on the CEO’s agenda.

Key areas of Corporate Social Responsibility include:

• Duty of CareEmployers have legal as well as moral obligations torespect the physical and psychological well-being oftheir employees.

• Traveler HealthThere is a hidden cost to companies arising fromstress and other complaints suffered by frequenttravelers.

• Safety and SecurityAs well as ensuring the personal safety of theiremployees, companies must also take into accountissues of insurance and equality, diversity and humanrights considerations.

• EnvironmentThe issue of greenhouse gas emissions is arguably thebiggest single challenge facing business travel.


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companies may wonder why they should be concernedabout the impact of business travel on CO2 emissions.While the numbers are small now, if the present trendscontinue, global aviation CO2 emissions are likely todouble in 20 years.

As recent studies have made clear, unless urgent actionis taken to reduce CO2 emissions, the process ofclimate change may become irreversible. Responsiblecompanies are therefore reviewing their business travelpractices now—if they haven’t already—and are takingappropriate steps to reduce emissions.

2008 Trend: Reducing CO2 Emissions and Reducing

Costs

Customers are not the only stakeholders who careabout a company’s carbon footprint. Shareholders andemployees also want to know that their company istaking positive action—and if not, why. The challenge forcompanies is to identify ways of reducing CO2 emissionsthat do not impact negatively on their business. Businesstravel is a prime target for reduction, not only because ofits high environmental cost, but also because employeesoften make journeys that may not be strictly necessary.An effective policy for responsible travel may well result inlower costs as well as lower CO2 emissions.

Over the past year to 18 months, the business travelindustry’s interest in the impact of business travel on theenvironment has continued to evolve. Business travel is a key area of interest for companies, as the carbonemissions produced by business travel can be up to 30%of a company’s total carbon emissions.

Companies are finding that how to manage theirbusiness travel carbon emissions is a significantchallenge. They are asking “How do we get to asituation where ‘GREEN=GREEN?’,” or in other words,“How do we balance the financial equation betweentaking action to reduce carbon emissions while at thesame time maintaining a business-as-usual approach tothe company’s business travel?”

A majority of the discussion in the business travelindustry regarding the environment (by both travelpurchasers and travel suppliers) has been centered onthe measurement and offsetting of carbon emissions.Many companies are examining carbon offsetting as ameans to negate their carbon emissions caused bybusiness travel. However, we believe it is a short-termsolution, because carbon offsetting will increase costs, asituation that is unsustainable long-term.

2008 Trend: Global Response to Reducing Carbon

Emissions Varies by Region

Europe

Historically, Europe has done more to reduce carbonemissions than any other region, with actions to protectthe environment becoming a part of everyday life.

The majority of businesses across Europe are nowincluding questions on the environment in theprocurement tendering process. Saying you have anenvironmental policy is no longer good enough—there isa need for targets and the ability to show ‘active’measures to reduce emissions. While Europeancompanies remain ahead of their counterparts in the otherregions regarding business travel and the environment,the increasing interest in North America is beginning toovershadow the ongoing activities taking place in Europe.

North America

Companies in North America have undertaken manysteps to understand why and how companies shouldaddress the issue of climate change and businesstravel. As more companies grasp the idea that CSR is afundamental part of business, they are quickly learningthe impact their business travel program has on theenvironment and are taking actions to potentially reduceits impact.



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Asia-Pacific and Latin America & the Caribbean

These regions have lagged behind other regions in termsof embracing the relationship between the environmentand business travel. This seems to be changingsomewhat in Asia-Pacific with Australia leading the way.The signing of a new voluntary international treaty onclimate change involving member countries of the Asia-Pacific Economic Cooperation (APEC) including the USAand China took place in September 2007. We expect thatthe Asia-Pacific countries will be next to embrace theneed for organizations to demonstrate they are reducingcarbon emissions.

What Can Travel Buyers Do?


Moving forward, we expect that companies will start to feel theneed to demonstrate the value to shareholders of following anenvironmental approach to business travel and to completelyengage their staff and supply chain in the process. We believe a growing number of organizations will start to treat theenvironmental challenge as a problem to be addressed like anyother standard business initiative. The continued integration ofCSR reporting tools, diagnostic analytics and standardprocesses in the business travel industry will only strengthencompanies as they begin to understand the potential financialreturn from being ‘green.’


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Policy Overview

During the past 12 months, an increasing number ofcompanies have been taking a closer look at their T&Epolicies as a way to potentially offset the current supplierprice increases seen in the industry. Companies are takinga broader look at their policies and are moving away froma traditional “travel policy” concept and implementing acomprehensive “T&E policy” strategy. In addition to T&Epolicies, companies are beginning to implement meetingsand environmental policies and controlling spend whilereducing corporate risk. Of course, policy is only the firststep and must be combined with strong compliancemeasures to achieve the desired results.

2008 Trend: An Increased Focus on T&E Policies

• Increased T&E Policy Focus—In 2007, AmericanExpress has seen an increased focus on T&E policyoccurring not only in the large and multinationalsector, but also with our middle-market customers.Mid-range companies seem to be taking a moreaggressive approach in understanding whatopportunities exist and are making the necessarychanges required to reduce costs, improve thecorporate risk profile and streamline processes.

• T&E Policy vs. Travel Policy—A continued focus onembracing all T&E areas, versus just focusing on keysourcing areas, has been a significant trend during2007. Companies are beginning to understand that byexpanding the number of categories within a T&Epolicy, the greater the opportunity they have to controland manage spend. One particular area is travel-related telecom. As this can account for 8% to 10%of a company’s total T&E spend, there is greatopportunity to strengthen company policy regardingtelecommunications. We typically find this to be oneof the weakest T&E areas in companies’ policies, withlimited guidelines in place regarding preferredvendors, allowed technologies (cell, pager, Blackberry,PDA, etc.) and spend levels.

• Expanded Policy Benchmarking and Development—Historically, we have seen our customers look to us tosupport them via an in-depth T&E policy assessmentprocess which has allowed them to understand theareas for improvement in their policy. We have seen ashifting trend in the past nine months, wherebyclients are now looking for increased benchmarkingand policy development support. This allows thecustomer to learn what its peers are doing in theseareas and gives them the opportunity to “start fresh”by designing a new policy that will support companyinitiatives. We have seen this trend across all clientsegments (middle market, large market, andmultinational) resulting in an approximate 150%increase in benchmarking and policy developmentengagements as compared to 2006.

We have observed the above trends throughout all fourregions of the world, with the most significant actiontaking place in North America. Europe and Australia arefollowing in more of an exploratory phase (similar toNorth America in 2004/2005). The remainder of Asia-Pacific and LA&C are slowly gaining traction in this areaas companies look to policy as a way to save money,reduce corporate risk and improve processes.

Policy Forecast

American Express anticipates customer interest in T&Epolicy improvement to grow in 2008. We believe thiswill be driven primarily by customers trying tocompensate for increasing supplier costs that weanticipate to continue well into next year. However,customers will also engage in policy improvementactivities to provide a clear directive policy employeescan understand and with which they can comply.

Globally, customers are seeing the value of acomprehensive T&E policy from a savings, risk andprocess perspective. We believe customers willcontinue their drive away from a traditional ‘travelpolicy’ to a comprehensive T&E policy strategy and see


POLICY FORECAST


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the need to implement policies that are more clearlydefined and appropriately aligned with their overallcorporate goals. In greater numbers, we predictcustomers will move beyond policy assessments andwill request more assistance in policy benchmarkingand building new global T&E policies.

We expect that the North American region will continueto lead in these initiatives. We anticipate Europe andAustralia will see a breakthrough year as they increasetheir focus on T&E policy and understand the significantrole it plays in successful business travel programs.Companies in the remainder of Asia-Pacific and LA&Cwill begin to insert new policy categories deliberatelyinto their programs as they begin to understand thevalue of doing so.



Travel buyers should examine the language in their policies toensure that it is effective. A key aspect of a strong T&E policy isto have policy language that is clear and direct and helpsreduce ambiguity and confusion for the traveler. Policy languagetypically reflects a company’s culture. In 2007, we saw severalcompanies strengthen their policy language as a first steptoward better T&E cost control. An example of this is movingfrom language such as ‘should’ and ‘spend wisely’ to ’required’and ‘the allowed amount is $XX.’

Travel buyers should also expand beyond the typical policyareas of air, car and hotel categories and look to take on amore comprehensive T&E policy approach. Policies shouldinclude additional T&E categories such as travel-relatedtelecom, business entertainment, contractors and consult-ants, and risk while providing clear guidelines for employeesto follow.

Not only are customers implementing stronger T&E policies,but they are also looking at other areas such as meetings andenvironmental travel policy to support their program initiatives.

• Meetings Policy—In the policy realm, meetings policy wasthe natural next step for companies to embrace. As manycompanies are now realizing the savings potential via aconsolidated meetings management program, they areseeing a need to standardize processes and procedures,define roles and responsibilities and communicate clearmessages to their employees. Customer interest in meetingspolicy has increased in 2007 approximately 50% over 2006.More information regarding meetings policy can be locatedin the Meetings section of this document.

• Environmental Policy—As companies contemplate how toinclude Corporate Social Responsibility (CSR) into theirbusiness travel program, adding an environmental businesstravel policy is a great way to set standards and raiseawareness in this area. More information regarding CSRand the environmental trends and forecasts can be found inthe CSR section of this document.


8 © 2007 American Express Company. The content contained in this document is the property of American Express. No part of this publication may be copied or reproduced without the prior written consent of the owner.

COMPLIANCE AND CHANGE MANAGEMENT FORECAST

Compliance and Change ManagementOverview

We expect 2008 to be another challenging year formost companies and their travel managers trying tocontain travel costs, as it will be another year in whichdemand will exceed supply and industry suppliers (air,car, hotel, etc.) are forecasted to raise fares/rates bysingle and double-digit percentages. Short of curtailingtravel, the most significant step companies are likely totake to thwart or contain these costs will be to buildtravel program compliance through subtle changemanagement techniques.

In our experience, companies focusing on changemanagement and compliance have reduced costsbetween 2% and 12.5% (of total air volume) byoptimizing current spend and increasing policy andpreferred supplier adherence.

Over the course of 2008, American Express predictscompanies will evolve and look to compliance andchange management techniques to do more than justmitigate industry fare/rate increases. They will applythese methods to:

• Contain total spend levels

• Increase and/or at least maintain negotiated deals

• Manage traveler risk and safety


To achieve cost reduction targets, travel managers should focustheir efforts on driving behavior change in five key areas:

• Lowering use of refundable airfares• Driving up the use of advance purchase fares• Optimizing online bookings• Defining, more narrowly, situations when first/business class

fares can be used• Increasing use of preferred suppliers, especially hotels where

compliance has hovered near 50%

Reaching those targets and hitting those key areas will requiredeft tactics as few companies are expected to take the approachof mandating behavior. We predict travel managers will look to‘out of policy’ monitoring tools to help them in this effort, and weexpect that usage of tracking/ monitoring tools will accordinglyjump more than 15%.

It is expected most companies will forego tools that requireapprovals for out-of-policy bookings and will instead favor moresubtle ‘notification’ features that will allow them to informtravelers of out-of-policy bookings and prompt them to changethe booking, if possible. Regardless of the type of tool selected,we expect that most travel managers will track out-of-policybookings by traveler and push detailed reports to internaldepartments/business units, looking to these internaldepartments/business units to manage their travelers andenforce compliance.

In contrast to companies which take an assertive stance oncompliance, those on the other end of the spectrum that avoidstrong controls and/or fail to tighten travel policies and reviewcompliance practices may deal with compounding costs. First,with demand exceeding supply and a company’s inability toincrease compliance, one-time preferred suppliers will be lessopen to negotiating new or better deals. Second, with noperceivably attractive fares/rates or the lack of a mandate to usethe company-selected agency, travelers will look to the Internetand other distribution outlets, which, on average, may furtherdrive up costs.

We predict the most significant step for companies to counter orcontain travel costs in 2008 will be to increase focus on travelpolicy compliance and change management.


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Meetings Management Overview

The rationalization of meeting spend continues apace,with North America leading the way. Consolidation ofmeetings volume continues to be very strong in NorthAmerica and is becoming increasingly commonthroughout Europe, especially with companiescompeting in the global marketplace. While NorthAmerican and European headquartered companies seekto better manage meetings spend and reduce overallmeeting expenditures, the emphasis in program goalsdiffers in these two regions. North American efforts aredriven primarily by procurement departments, andtherefore are highly focused on savings. Europeanefforts are driven primarily by marketing departments,and are therefore more highly focused on eventeffectiveness combined with cost reductions.

North America

2008 Trend: Meeting Costs Continue To Increase

With hotel spend representing an average of 90% of totalland expenditures for corporate meetings and events,hotel guestrooms now represent nearly half of all meetingspending, exclusive of air expenses. This key spendcategory represents 47% of total land expenditures ascompared to 37% just three years ago.

Meeting Land Spending by Category

Moreover, the average guestroom rate has alsoincreased 10% year-over-year between 2006 and 2007,from $213 to $234. Further, the average meeting landspend per event has risen 34% for the first half of 2007as compared to last year.

YOY Land Spending Increases

Upward trends such as these directly impact themeetings industry and drive up costs. Cost increases inthe first half of 2007 were driven mostly by peakinghotel occupancy levels and increased guestroom rates,as mentioned above. Additionally, we think thatincreases can also be attributed, in part, to a change inthe profile of corporate events, such as an increase inthe number of attendees and meetings of longerduration. Companies should expect to see highguestroom rates and subsequently higher meetingcosts throughout the remainder of 2007 and into 2008.

2008 Trend: Small Meetings Are a Key Area of

Opportunity

The 2007 PhoCusWright Groups and Meetings Studyconcludes that roughly two thirds of corporate eventshave less than 50 attendees, which aligns with ourexperience. Thus, small and simple meetings requiringguest rooms, meeting space and breakfast, lunch andbreaks are being identified by many companies as a toparea of focus for enhanced control over the meetingbuy, increased adherence to preferred supplierprograms and the mitigation of contractual risk.

Small meetings are typically the most decentralized inan organization and therefore represent the greatestopportunity. Additionally, smaller meetings are oftenmanaged in patchwork fashion by a number ofadministrative resources and personnel. Implementing asmall meetings program can standardize processes andreduce the risks associated with these meetings. A smallmeetings program can also provide pre-negotiated


MEETINGS MANAGEMENT FORECAST

Other 9%Ground

Transport1%

Additional Hotel10%

Food & Beverage33%

Accomodations47%

2006 to YTD 2007

10%

34%

Average Guestroom Rate Average Spend per Meeting


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meeting packages to improve savings, reduce execution time to improve productivity and ensurecontrol over meeting activity and, most importantly,over contractual agreements.

2008 Trend: Balance Shifts from Savings to

Satisfaction

While recent years have shown many companiesfocused exclusively on driving cost out of meetingexpenses, we are seeing indications of a nascentmovement focusing on attendee satisfaction, and inEurope especially, on event effectiveness. While focusis shifting toward a more balanced approach of savingsand satisfaction, cost savings still remains paramountfor many organizations.

2008 Trend: Increased Focus on Compliance

Tightening market conditions are forcing companies totake a more hard-line approach to policy and programcompliance. More companies have demonstrated awillingness to embark on a mandated meetingsprogram as a way to deal with increasing costs, as wesee from the following studies:

• 39% of companies have already implemented or plan toimplement consolidated purchasing practices, whileanother 26% are evaluating the option. (Source: MeetingProfessionals International FutureWatch 2006 Study).

• 49% of companies report to either having a discretemeeting/events policy or incorporating a meeting/eventspolicy within their T&E policy. (Source: AmericanExpress Meetings & Events Best Practices Lab, 2005).

An actual program often entails mandating specific,critical components of the meeting such as eventregistration, centralized procurement servicing andutilization of a consistent form of payment. Additionally,we are observing many organizations, notably financialservices and pharmaceuticals companies, thatpreviously resisted the mandate approach, are nowimplementing tougher policies to drive centralizationand cost reduction behaviors.

2008 Trend: Technology Still Primarily in Hands of

Early Adopters

Early technology adopters continue to utilize meetingsmanagement tools as part of their strategic programeither by purchasing the rights to a tool or by engaginga meeting management company that can usetechnology on their behalf. Many global corporations,however, are waiting for enhanced global functionalitythat will allow for the true consolidation of multi-currency and multi-lingual programs. The merger of two of the primary meetings management softwareproviders in the industry has led to some wariness, and a number of technology companies are trying toincrease their role in this market.

2008 Trend: Consolidating Meetings Globally

As domestic programs mature, there is increasinginterest in developing globally consolidated meetingsprograms. The push to globalize a program typicallyoriginates out of North America or Europe, withcompanies attempting to extend their successes withexisting programs into new regions. While the NorthAmerican region leads with centralized sourcing andplanning and mandated meetings policies, Europe is aclose second. Other regions, while demonstrating anincreasing interest in centralization, still lag behind theNorth American region and Europe in this area.Additionally, North American and European head-quartered companies are bringing their unique culturalperspectives to bear, with North America focusedprimarily on cost reduction, and Europe more focusedon cost reduction coupled with event effectiveness.This is not surprising given that program consolidationin North America is typically driven by procurementdepartments, and in Europe, by marketing andcommunications departments.





While the average cost of a meeting has increased, corporationsaren’t necessarily spending more across all of their meetings.Although land spend per attendee was up (due in large part toovernight guestroom rate increases), meeting spend remained flatover last year. This was the result of companies employingvarious strategies to offset or reduce meeting costs.

Consolidation of meeting spend, which results in greater visibility,strategic oversight and supplier leverage, continues to be theprimary strategic lever for many companies. Leading edgeorganizations are using program consolidation to more effectivelylink transient and meeting volumes in destination selection andsupplier negotiations. This leads to enhanced vendor negotiationsand additional contractual concessions.

Within North America, levels of consolidation range from newlyconsolidating to companies with nearly 100% consolidation andcompliance. Those with the highest levels of programconsolidation and compliance typically enjoy senior leadershipbuy-in and executive sponsorship.

Another way companies are combating rising costs is byfocusing on spend at the event level. This method reducescosts by streamlining the meeting process. Actual tactics canvary greatly from one company to the next according toindividual corporate objectives and organizational structure.Cost reduction strategies include:

• Consolidating multiple small events into fewer large events

• Downgrading the venue

• Selecting venues in second-tier cities

• Shortening event duration

• Reducing the number of attendees

In the transient segment as well as for meetings, we observethat many companies are downgrading their hotel choices from high-end properties to more moderate level hotels. Itshould be noted, however, that this shift is having the unwantedeffect of increasing demand and competition within that marketsegment as well.


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Online Program Optimization Overview

American Express customers’ usage of corporate onlinebooking tools crossed a major threshold in 2007 withmore than 50% of U.S. corporate travel transactions beingbooked online. Growth of online in the U.S. is expected tocontinue, with online penetration reaching 55% in 2008,as corporations continue to seek opportunities to optimizetravel spend across as many categories as possible. Andwhile online booking tool utilization continues to increase,as the U.S. market matures, strategic actions thatcorporations are pursuing include the integration oftechnology to improve T&E expense visibility and enhancecontrol and oversight over expenses. According toAberdeen Research1, the top concern and biggestchallenge for U.S. corporations is achieving compliancewith policy, which is generally considered by experiencedprocurement professionals to be the key to containingtravel costs.

2008 Trend: Procurement Has Increasing Role in Travel

Purchasing

The function of travel is increasingly reporting intoprocurement divisions and, by all projections, this shift isexpected to intensify. As with any other spend category,the application of procurement discipline and principles isbeing directed to manage the total cost of travel. In aneffort to curtail controllable costs, improve visibility andcontrol over ancillary travel-related expenses, and addresscompliance in terms of fiduciary responsibility, companiesare intensifying their efforts to automate travel bookingand integrate end-to-end T&E programs.

In the current procurement environment, consolidationand globalization are emerging as increasingly popularmeans of tightening program control and leveragingeconomies of scale to drive productivity and efficienciesand best-in-class savings. With corporations facingconstant pressure to deliver shareholder value, the driveto contain costs while continuing to achieve the best-value return on investment in business-critical activitieshas become (and will continue to be) a businessimperative. Globalization, privacy and reportingrequirements prompted by Sarbanes-Oxley are focusing

more attention on adoption of a uniform travel policyincorporating local or regional nuances as well asdeployment of online booking solutions to drivecompliance at the point of sale. With the rise ofglobalization and government regulations, technologysolutions make processes more efficient and add value.Today, customers want globally integrated purchase andprocess solutions, business travelers want a total tripexperience and suppliers want distribution efficiency andbusiness development success.

2008 Trend: Travel Technologies Reach the Long Tail

The most dramatic changes in the corporate online travelmarketplace are related to the technological advances andniche offerings providing efficient distribution of andaccess to a wide variety of travel-related services. These“Long Tail” services, (such as airport parking, dining andevents tickets, car service, package shipping and audio/web conferencing), on a business travel managementplatform, will not only spur additional utilization of onlinebooking tools, but also redefine the definition of adoption.The integration of travel-related purchases or “Long Tail”services into corporate online booking tools provides notonly an enhanced user concierge experience, but alsoprovides business and procurement managers withimproved visibility to their services spend and the ability tomanage spend in these areas. The Long Tail theory,introduced in October 2004 by WIRED magazine writerChris Anderson, is a business and economic concept thatsays products with low sales volumes can collectivelymake up market share that rivals or exceeds the“blockbusters” or “best sellers.” This same theory cannow be applied to business travel.

According to CAPS Research2, 54% of corporatepurchasing is spent on services, 41% of services spend isnot controlled by the finance department and companiespay 15% to 27% higher prices outside of corporate rules.Booking tool technology that enables a user to book air,hotel and car as well as other services like airport parking,dining and event tickets, car service, package shippingand audio/web conferencing, delivers greater control of


CORPORATE TRAVEL ONLINE PROGRAM OPTIMIZATION FORECAST

12006 Aberdeen Group Travel & Entertainment Expense Management Study,Reduce Processing Costs & Improve Policy Compliance

22003 Center for Advance Procurement and Supply (CAPS) Research,Purchasing Performance Benchmark Study


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unmanaged spend. This technology also allowscorporations to apply best practices in driving adoption andsavings for air, car and hotel and extend them to logicallyadjacent services within the same platform. Another majorbenefit this provides travel and procurement managers isthe ability to manage the communication and enforcementof spend policies at the point of purchase and the ability toadd or modify suppliers and policies for multiple serviceswithout impacting end users or existing businessprocesses. These advances in technology provide directsavings to the company’s bottom line, empowerprocurement groups to optimize services spend anddeliver consumer services that employees enjoy using,while increasing employee productivity. We expect thatinnovative technology features focused on the userexperience will drive adoption to the next level.


The function of procurement coupled with emerging andinnovative technologies continue to drive utilization of onlinebooking tools. Companies seeking to optimize travel spend arepurchasing more complex travel online. Improved trans-actional capabilities of online tools are contributing to year-over-year growth of online purchasing, and we expect thatmore than five in ten corporate transactions will be bookedonline in 2008.

Best-in-class corporations are achieving 85% or greaterutilization of online booking tools for air, car and hoteltransactions. In return, these corporations are achieving, onaverage, 40% improvement in policy compliance. Ascorporate travelers improve adherence to travel policy andpreferred vendors, companies are in a strategic position tomeet supplier commitments. For many firms, this translatesinto stronger negotiating leverage with vendors, thus drivingmore savings. Mid-size corporations are achieving higherrates of adoption within a reduced length of time, with anaverage speed of adoption reaching 75% utilization withinthree months of deployment.

These levels of adoption are being driven by both corporatestrategic actions, improved consumer-facing technology,

transactional capabilities and accessibility to travel-relatedcontent outside the confines of air, car and hotel.

Corporations focused on cost reduction and return oninvestment recognize the importance of senior managementendorsement of the online channel to drive behavioral change.Without endorsement from the highest levels, we believetravelers will be less likely to buy in to the program.Consequently, compliance will be compromised and theorganization will be unable to maximize cost savings,economies of scale, operational efficiencies and travelerproductivity. More organizations are also implementingmandated programs and policies along with non-complianceconsequences to drive online utilization and curtail out-of-policy and maverick spending. Key to the success of theprogram is balancing the corporate strategic initiatives withtraveler satisfaction.

Online tools continue to streamline the booking process byproviding a consumer design interface to enhance usability andimprove the user experience. Recognizing that businesstravelers are consumers, technology providers are developingenhanced transactional functionalities and are combiningcontent from multiple sources to provide the ultimate userexperience. Improvements to both the interface and the rangeof content create a habit-forming experience for the travelerand drive savings for the company.

Corporations are also optimizing spend by purchasing morecomplex travel online, including multi-city domestic andinternational travel. There is greater focus on efficienciesgained through “attachment” rates (the inclusion of a hotelbooking with an airline reservation) and driving increasedcompliance to preferred hotel agreements through themanaged travel channel. Having reached high utilization ofonline booking tools to purchase air, car and hotel,corporations are now focusing on growth opportunities andprocess efficiencies presented by additional technologicalfeatures and capabilities. Booking tool technologies offeringaccessibility to unused tickets, ticket exchange functionalities,rail content and meeting registration capabilities addconsiderable value and encourage travelers’ repeat use.



14

2008 Trends in Canada

Online penetration continues to grow, albeit at a slowerrate in the Canadian market, with more than two-in-tencorporate transactions being booked online in 2007. Weexpect this trend to continue in 2008, driven largely byboth multinational and mid-size companies continuing todrive utilization of online booking tools. Best-in-classmultinational and mid-size companies are achievingonline adoption rates in excess of 80%.

There are several factors impacting the rate of onlineutilization in this market. The function of travel reportinginto procurement, or finance divisions, is not aswidespread in Canada as it is in the United States.Procurement continues to play a strategic role insourcing; however, oversight of the program, for themost part, continues to fall under the function of travel.As corporations strategically focus on managing travelspend, we expect that the role played by procurementdepartments in travel management will increase. Weexpect that this shift will directly impact the value andvisibility of the online booking channel as a means toimprove compliance and control cost. While corpora-tions increasingly implement automated expensemanagement tools to help address the compliance andcontrol aspects of T&E expenses, the end-to-endintegration with online booking tools is developing at aslower pace. As compliance officers address concernshighlighted by process audits, there is increasedcorporate interest in tools that enhance their oversightand control over expenses.

The dominant positions of Air Canada and WestJetseem to have created market dynamics which influenceboth pricing and access to content. Air Canada’sintroduction of its Corporate Flight Pass program andthe move to make several offerings available onlythrough their website appear to have had a directimpact on corporate distribution channels. GDSproviders and technology companies have reacted bydeveloping application programming interfaces tointegrate Air Canada’s web-only content with contentfrom the GDS or provide a direct connection with the

API via a corporate online booking tool. These solutionswill provide corporations with access to content,allowing greater control and containment of maverickspending through unauthorized channels and providinggreater oversight and compliance to policy.

2008 Trends in Europe

Europe is narrowing the gap with the United States interms of online business travel booking and programmanagement. With increased consolidation andglobalization, corporations are leveraging economies of scale and viewing online booking as an integralchannel within their travel management programs.These firms have demonstrated tangible costreductions and return on investment by implementingaggressive strategies to drive online adoption. WhileU.S. multinational companies have led the field in termsof high levels of adoption, larger local firms andmaturing markets are contributing to the improvedusage of corporate online tools. Many European firmsnow mirror the increasing trend in the U.S., with travelreporting into procurement, adding renewed rigor tocontaining costs and improving compliance. Businesstravel is in a state of growth, and amongst increasedconcerns of rising costs, corporations rank reducingcost as the highest priority.

Similar to past market drivers in the U.S., onlinecorporate travel in Europe will be impacted bycorporations’ increased use of formal policies ormandates to drive adoption. This is also reflective ofmore corporations embracing tools and techniques ofprofessional travel management and the need forimproved control over travel expenditures.

Often the biggest challenge for online booking toolproviders is the ability to meet market requirements todesign innovative solutions for accessing local contentsuch as low cost carriers and rail. As corporationstighten controls over travel spend, rail is an increasinglyattractive economic alternative when compared to airtravel. Additionally, as more corporations implementsocially responsible eco-policies, rail is viewed as more




eco-friendly in terms of reduced carbon emissions. Theavailability of rail content through GDS systems andonline booking tools is supportive of both costcontainment and online adoption. Recent developmentsby GDS companies to integrate rail offerings intouniversal platforms will further simplify the bookingprocess. In several European countries, such as France,Germany and the UK, accessibility to rail content is amarket requirement due to the high rate of railutilization for business travel. Booking tool providers arecontinuing to develop solutions to deal with otherlocalized requirements including access to non-GDScontent, ground transportation and dynamic discounts.

Online bookings in Northern Europe, specifically the UK,Benelux and Nordic countries, are outpacing SouthernEurope. The UK market appears to be reaching maturity,with Scandinavia, France and Germany following. Marketreadiness in Southern Europe is not as high due to aculture of high-touch service. While Southern Europeappears to be in the early adoptive stage, the region as awhole will continue to experience online growth.

2008 Trends in Asia-Pacific

The Asia-Pacific corporate online travel market isrelatively immature; however, we think it is poised toexperience dramatic growth. Early adopters in Australiaand Singapore have driven much of the growth in theregion. This region represents unique challenges,diverse cultures and nuances that are criticalconsiderations for corporate online platforms. In manycases, international travel is complex with multi-segment flights, and access to content is a challenge.The return on investment for online corporate tools isminimal in China and India, reducing the opportunity ofcost reduction through an online channel. The high-touch service provided by travel counselors presentsanother challenge in migrating travelers online.

Australia stands out in the region due to its high onlineadoption and market maturity in terms of technologyand operational infrastructures. Business travel patternsin Australia are similar to those in North America with a

high penetration of air travel in the domestic market,and accessibility to inventory has not been a majorobstacle. Additional opportunities to expand onlinegrowth include the inclusion of booking internationaltravel online. The online adoption rate averages 60%;however, many best-in-class corporations areexperiencing adoption rates in the 90%+ range. Unlikeother countries in the region facing obstacles withaccess to inventory and negotiated pricing whichrequire agent intervention, the 70% “touch-less” rate in this region is considered best-in-class. Onlineutilization continues to accelerate with onlinepenetration, expected to reach 50% of all transactionsby late 2008. The function of travel reporting intoprocurement is prevalent and contributes to thefinancial advantages of online utilization. Procurementprofessionals are now focused on the integration ofonline booking tools with automated expensemanagement systems.

China represents the fourth largest business travel marketin the world after the United States, Japan and Germany.3

While growth in the corporate travel market in China isanticipated to grow significantly over the next few years,the lack of GDS deregulation is a challenge to onlinedevelopment. There are significant challenges for bothdomestic and international reservations. All domestic airtransactions must be booked by the ChineseGovernment-owned TravelSky central reservation system.CITS-American Express has developed SMART, an onlinebooking tool that can interact with TravelSky and can,therefore, access domestic air inventory. Hotel inventoryfor major destination cities is available via some GDSproviders such as Abacus and Galileo; however, capacityin major cities regularly exceeds 85%. Many local hotelsare not listed in the GDS, a particular problem outside ofShanghai, Beijing and Guangzhao. China is in the veryearly stages of e-commerce and is an immature creditcard market, with cash or invoice dominating payment forbusiness travel.

Buoyed by the strengthening tourist sector and anincreasingly competitive low cost carrier market,

3 2006 Barometer of Business Travel Management in China, released byAmerican Express October, 2006


16

Singapore presents some great opportunities formoving online, while at the same time providing anumber of challenges. While multinational corporationshave been utilizing corporate online booking tools in thismarket since 2001, adoption has been somewhat limitedby the lack of inventory available in the tool—a challengewhich continues today. Singapore Airlines is the dominantcarrier; however, net fares are not loaded as point-of-salediscounts by the airline. The airlines offer “best fare ofthe day” which is communicated by fax or e-mail and israrely loaded in the GDS. Wait listing is common andcannot be accommodated by the online booking tool.Singapore is also a “high-touch” market, with travelcounselors providing a high level of service to travelers.

Currently in Hong Kong, airlines do not ensurecustomer-negotiated or other market net fares areloaded into the GDS, severely limiting the inventory thatwould be available through an online tool. This isconsidered a critical path in order to move online.Without this barrier, Hong Kong would be a goodcandidate for an online solution. Inventory factorsrequiring additional consideration include low costcarriers currently booked via the airline website and thehigh level of wait listing (up to 20%) during peak travelseasons. Cash is the preferred form of payment;however, this is not facilitated by online booking tools.Another important factor is language. Current globalbooking tools do not support Cantonese and would needto be developed specifically for Hong Kong and theGuangzhao province of China.

With the Indian government’s liberalized outlook on theindustry, the business travel market has experienceddramatic growth in recent years and is expected tocontinue to accelerate. While India currently lags behindother countries in the region in terms of corporate onlineadoption, the market is similar to the United States interms of Western practices and English as the languageof business. The corporate culture and business style ofmanagement is expected to drive online adoption similarto what has been achieved in the U.S. (American Expresscurrently plans to introduce a corporate online bookingtool in India in 2008.)

The potential for corporate online booking is high;however there are significant challenges for bothinternational and domestic reservations. Several low costcarriers have entered the market and experienced highgrowth; however, access to inventory is limited to theairline website and not available through the GDS.

2008 Trends in Latin America & theCaribbean

LA&C is emerging as one of the fastest growth markets,following Greater China and India. Online penetration inthis region is relatively low, expected to reach 10% byyear-end 2007 and to increase to 15% in 2008. Overallonline adoption rates average 26% across the region,indicative of the developing e-commerce stage. Atpresent, the largest markets for the online channel arerepresented by Mexico and Brazil. Much of the onlinegrowth is attributed to multinational globalization;however, emerging growth is being driven by small tomedium size enterprises.

Mexico leads the region with the highest Internetpenetration and market maturity for a corporate onlinebooking tool. With the entrance of new low cost carriersand their growing market share, technology providers areintegrating direct connect capabilities to provide visibilityand access to content. This region has a high percentageof administrative staff managing travel on behalf of thetraveler and, therefore, requires targeted strategies todrive online utilization. In other markets, low cost carrierspresent challenges in terms of access to content. InBrazil, TAM and GOL are driving online technologyproviders to develop Web connections to integrate non-GDS inventory. Market readiness and Internet usage inBrazil is growing and more corporations areimplementing corporate online tools. Argentina is anemerging market for online travel technology, althoughoverall market readiness level is considered low. Manycorporations do not have a comprehensive travel policyor sophistication of travel management. Additionally,Aerolineas Argentinas represents 95% of the domesticmarket share and recently changed filing of fares onlocal routes within Argentina.




Global Airfare Overview

A look back at the first half of 2007 validates several ofthe predictions made during last year’s forecast.Whereas short-haul fares were anticipated to increaseby 3 to 5%, actual fares paid by American ExpressBusiness Travel clients increased by 2% during theJanuary to June time period. Companies have focusedon “buying smarter” by re-visiting, re-writing andenforcing travel policies, while encouraging and oftenrequiring employees to book their trips online andfurther in advance via pre-trip auditing tools. In theAmericas, airlines pared back fare increases due to thegrowth of low fare airlines and a sense that increaseswould lead to reduced demand.

On long-haul routes, fares were anticipated to increaseby 3 to 7%, and during the January to June time period,actual fares paid by American Express Business Travelclients increased by 7%. The world became smaller asdemand for international air travel grew at unprecedentedrates and passenger load factors (the percentage of seatsfilled on each flight) reached all-time record highs.

2008 Global Airfare Trends

We expect that several key trends that have influencedthe airline industry to date during 2007 will continue toimpact airfares in 2008. Upward pricing pressuresinclude continued business travel demand, moresophisticated airline inventory and pricing controltechnology, rising jet fuel prices and airlineconsolidation. Downward pricing pressures includemore efficient aircraft and more efficient airlineoperations, stronger corporate travel policy enforcementand traveler compliance, growth of the low-fare pricingmodel and liberalization (i.e. open skies agreementsbetween countries that encourage competition).

On a global basis for 2008, American Express BusinessTravel forecasts that domestic/short-haul economy classfares will increase by 1% to 4% and international/long-haul business class fares will increase by 5% to 8%.

Global Airfare Forecast Increases for 2008

Global Airfare Forecasts

2008 Forecast: North America Airfares Forecast to

Increase up to 10%

In the United States, short-haul economy fares areexpected to rise by 1% to 5%, and internationalbusiness class fares are expected to rise by 5% to 10%.We expect that slowing growth of business traveldemand (partially due to stress placed on the air trafficcontrol system, partially due to an anticipated slowdownin economic growth), coupled with the continuedemergence of low-fare airline penetration and strongerpolicy compliance and enforcement, will be balanced byfuel pressures, smarter airline capacity control andsophisticated pricing technology. Such technology willallow airlines to more intelligently price their productsaccording to consumer specifications (e.g. charging apremium for seats with more legroom, aisle seats, seatsnear the front of the aircraft as well as upgrades to apremium cabin at an acceptable price point). Contrary tolast year’s forecast, no major industry consolidation isanticipated for the next 12 months, although alliancesare expected to expand in both scope and strength.

On the international front, the USA-EU Open SkiesAccord is expected to bring more competition to thetransatlantic market, in particular to/from London/Heathrow. Furthermore, we anticipate that the growthof point-to-point flying will enable more travelers to flybetween destinations without the need to connect via ahub airport. Overall, continued growth in business traveldemand, globally coupled with improvements in the


1% to 4%

5% to 8%

Global ForecastAirfare Forecast Increasesfor 2008

Domestic/Short-haul(Economy Fares)

International/Long-haul(Business Fares)

GLOBAL AIRFARE & EUROPEAN RAIL FORECAST


18

premium cabin product and the end-user experience(e.g. lie-flat beds), is likely to lead to a further increasein global air fares year-over-year.

Within Canada, American Express Business Travelforecasts a 2% to 5% increase in short-haul intra-Canadaeconomy fares, a 5% to 8% increase in long-haul intra-Canada economy fares, a 3% to 6% increase intransborder economy fares, and a 7% to 10% increasein international business fares. Enhanced competition onkey routes, plus deeper penetration of flight passproducts and web-based solutions, both of which areintended to reduce published prices, will be offset bystrong demand driven by a growing economy, improvedinternational products and menu-based pricing models.

North America Airfare Forecast Increases for 2008

U.S. Upward Pressure:• Fuel prices• Reduced capacity• Sophisticated inventory and pricing technology

U.S. Downward Pressure:• Slowing growth of demand• Low fare penetration• Stronger corporate compliance and enforcement

Canada Upward Pressure:• Continued strong demand• Improved international products• Menu-based pricing

Canada Downward Pressure:• Increased competition/capacity on key

corporate routes• Negotiated pricing

2008 Forecast: UK Short-haul Airfares Drop,

European Business Fares Increase Strongly

Throughout Europe, business fares are expected tocontinue to rise strongly while low cost carrier activitycontinues to contain economy rate increases and, incertain markets such as the United Kingdom, actuallytrigger overall decreases in economy rates paid.Demand in general remains strong and, along with highfuel prices, will maintain upward pressure on rates paid.

There are a number of strong drivers leading toforecasted fare increases in Europe’s major markets,the foremost of which is continued demand for travel toEastern Europe, the Far East, South Asia andTransatlantic, particularly corporate traffic in bothbusiness class and premium economy. Meanwhile,supply will be restricted as heavy increases in capacityon major traffic routes are not anticipated. Finally, theentry of the new Airbus A380 aircraft will not be fullyfelt in the short term.

Low cost carriers continue to gain market share on short-haul routes—particularly in the UK thanks to aircraftpurchases—leading to dramatic reductions in fares paid.Downward pressure on short haul pricing is likely tocontinue in the main low cost carrier hubs—UK andGermany—but also shift to new markets, such as Italy,as hundreds more aircraft join low cost carrier fleets.

For the entire region, American Express BusinessTravel forecasts a 2% to 5% increase in short-hauleconomy fares and a 6% to 10% increase in long-haulbusiness fares.

In France, we expect that the lack of a true competitor tothe national airline on domestic routes will be offset bythe growth of the high speed rail system. On long-haulroutes, strong demand to major business destinationswill cause business fares to increase significantly.


1% to 5%

2% to 5%

3% to 6%

3% to 5%

5% to 10%

5% to 8%

2% to 4%

7% to 10%

1% to 5% 5% to 10%

United States

Canada—Domestic

Canada—Transborder

Canada—International

North America

RegionDomestic/Short-haul(Economy Fares)



19

In Germany, the growth of low cost carriers is expectedto temper short-haul fare increases; however, we believea strong economy will drive business fares up in 2008.

In Sweden, another strong economy coupled withcapacity restraint and improved airline pricing technology/yield management are likely to drive fares up.

In the United Kingdom, the expansion of low costcarriers continues to have a dramatic impact on short-haul fares, much to the delight of consumers. The OpenSkies Accord with the United States and the success ofpoint-to-point UK-USA airlines should mitigate long-haulfare increases on key routes.

Europe Airfare Forecast Increases for 2008

Europe Upward Pressure:• Strong demand, particularly to Transatlantic, Far East,

and South Asia• Fuel prices• Capacity restraint

Downward Europe Pressure:• Low cost carrier expansion• Competition with high speed rail• The potential for slowing economic growth

2008 Forecast: Europe Rail to Feature New High-

Speed Lines

Rail fares tend to be stable in major European marketsas international and domestic rail fares of the nationalrail companies are generally well regulated in eachmarket. In Germany, Deutsche Bahn (DB) fares are notexpected to increase. They last rose 3% in late 2005. InFrance, SNCF (Societe National de Chemins de Fer)fares are expected to rise 3% in the early second half of2008. In the UK, efforts to move rail funding from theTreasury to the user are set to have a considerableimpact on fares. UK season ticket and saver fare priceincreases are capped by regulation at 1% aboveinflation. However, rail franchises have recentlyannounced fare hikes on unregulated fares (whichaccount for more than 60% of all journeys) well abovethis and in some cases approaching 20% to 30%.These increases apply to new franchise awards whichtake effect soon and are the subject of much debate.“Peak time” and “off-peak” fares are also being widelyintroduced which, in effect, amount to fare increases.

The combinability and competitiveness of European railis expected to change dramatically in the coming year.The new ultra-high speed line between Paris andStrasbourg which opened in mid 2007 has alreadyrevolutionized travel between Paris and eastern Franceas well as onward to Luxembourg and Germany. Weexpect that the high speed lines between Amsterdamand Brussels and Aachen and Liege on the line toCologne, which will finally open in 2008, together withthe completion of the last part of the high speed link intoLondon (St. Pancras) this November, will usher in an eraof high-speed ground travel that can compete well withairlines on journey time, price and comfort while leaving asmaller carbon footprint. Operators are finally collab-orating on through fares and through-ticketing and railnow becomes a very attractive alternative for travel inand between Germany, Benelux, France and London. TheUK's high speed network, however, seems destined tostart at the Channel and end at London.


0% to 2%

3% to 4%

4% to 6%

-5% to -10%

10% to 12%

6% to 8%

6% to 8%

1% to 2%

2% to 5% 6% to 10%

France

Germany

Sweden

United Kingdom

Europe

RegionDomestic/Short-haul(Economy Fares)




2008 Forecast: Asia-Pacific Airlines See Growing

Gap Between Products Aimed at Business Travelers,

Budget Travelers

It appears that the future in Asia-Pacific will be built onthe premise of an increasingly mobile population amidsta backdrop of positive economics. Globalizationpromises very little other than the need for more airtravel. Hence, 2008 promises to be another boom yearfor aviation in Asia-Pacific. Yet growth in demand bringswith it growth in competition. Market forces thatordinarily may signal the case for a fare increase aretempered by the need to reduce fares to secure marketshare. In this growing market place, distinction betweenmarket segments remains apparent, with productstargeted at the distinct segments of leisure or businesstraveler. Nonetheless, the fragile economy of running anairline remains dominated by the need for high capitalinvestment and the ongoing struggle to strip cost fromthe operating model.

Asia-Pacific is a diverse region. Liberalization continuesto promote changes in ownership structures, and jointventures are becoming more common. This is alandscape where airlines have a history of profitabilityand yield growth, despite volatile oil prices and costlyrestructures. As the low-cost footprint grows across theregion, so does the development of premium products,clearly delineating the products and the differencesbetween traveler options.

This will be an interesting year for fleet upgrades. Thelong awaited Airbus 380 will be here to welcome thenew year, and the Boeing 787 is scheduled to arrive atthe end of 2008. The A380 was launched with thepromise of easing capacity constraint, although earlycustomers are opting for more conservative config-urations of less than 500 seats, allowing room forenhanced products, including suites, more flat seatsand even a fourth cabin of service.

Overall, capacity constraints are likely to persist formany key routes in the region in 2008, and airlinesanticipate high average load factors. For the entire

region, American Express Business Travel forecasts a1% to 3% increase in short-haul economy fares and a3% to 6% increase in long-haul business fares.

In Australia, we expect to see another low-cost playerbegin to wedge itself into the domestic market, whilelow-cost, long-haul players open up new internationalroutes. The potential scenarios are numerous; however,business travelers need to be astute with their buyingon key routes to mitigate improvements in the airlines’savvy yield management systems.

China is expected to continue to open up internationalactivity, with a key focus on the Sino-USA routes.Beijing will be in the spotlight, courtesy of the OlympicGames, though we can expect to see increased activityaround inland cities such as Dalian, Chengdu andChongqing. Economic confidence foretells appreciationof the Renminbi, resulting in higher costs for bothvendor and buyer.

We expect Hong Kong to continue to experience apolarization of fares, with premium fares moving aheadat a faster rate than their economy equivalents. Thebenefit of being a financial hub supports a good returnfor the former (particularly in the current economicenvironment), while long-haul, low-cost activity is likelyto assist in keeping the back end in check.

India remains an interesting market to watch as existingplayers evolve and new entrants shuffle for marketshare. Expectations are for competitive pricing in 2008.

Japan promises to be more confident in 2008, whichshould translate into upward price movements. This isdespite the low pace of regulatory change in Japan whichcontinues to burden carriers with high operating costs.

Singapore may test the stamina of business travelers.Although low-cost pricing will keep pricing flat on someroutes, premium product is likely to truly open thepricing gap on others. It will be interesting to see whichbusiness travelers pay this premium in order to satisfytheir needs.



Asia-Pacific Airfare Forecast Increases for 2008

Asia Pacific Upward Pressure• Strong demand driven by economic growth• Premium product• Fuel prices• Capacity restraint

Asia Pacific Downward Pressure• Low fare airline penetration• A need to build market share

2008 Forecast: Mexico Fares Drop, but Strong

Demand in Latin America & the Caribbean Forecast

Airfare Growth

Similar to the North America marketplace, buyers inLA&C can expect many of the same trends where low-fare airline penetration (particularly in Mexico) andincreased capacity on long-haul routes are likely to besomewhat offset by rising oil prices, regional economicgrowth and strong demand. Overall, American ExpressBusiness Travel anticipates short-haul economy fares toincrease 1% to 2% and long-haul business fares toincrease 4% to 7%.

Latin America & the Caribbean Airfare

Forecast Increases for 2008

LA&C Upward Pressure• Strong demand driven by economic growth• Fuel prices

LA&C Downward Pressure• Low fare airline penetration• Fare matching strategies by legacy airlines• Increased capacity

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1% to 3%

2% to 4%

2% to 3%

-1% to 1%

5% to 7%

4% to 6%

5% to 7%

0% to 2%

3% to 5% 4% to 6%

-1% to 1% 2% to 4%

1% to 3% 3% to 6%

Region

Australia

China

Hong Kong

India

Japan

Singapore

Asia-Pacific



4% to 7%

3% to 5%

3% to 5%

-6% to -9%

6% to 8%

6% to 9%

2% to 4%

3% to 5%

1% to 2% 4% to 7%

Region

Argentina

Brazil

Chile

Mexico

LA&C






In light of the forecasted increases, travel buyers should considerthe following strategies to better manage their programs:

• Online bookings and advance purchase tickets are proven toreduce airline expenditures. In fact, American ExpressBusiness Travel clients in North America paid $35 less persegment online than offline (i.e. telephonic) and $40 less persegment on 8 to 14 day advance purchases than 0 to 7 dayadvance purchases during the first six months of 2007. And, in a trend that was predicted in the 2007 forecast, more andmore travelers are buying online and in advance. Onlinebookings increased by 6.5% while 8+ day advance purchasesincreased by 1.4% year-over-year.

• As airlines expand their long-haul capacity and many restraintheir short-haul capacity, companies with significant volume onlong-haul routes (and, in particular, first and business classcabins) should leverage that volume to secure improvednegotiated rates.

• Companies that are able to direct traffic to contracted airlinesare likely to see the greatest return on their expenditures, asairlines continue to invest in more sophisticated contractperformance reporting. This fact, coupled with the possibilityof an economic downturn, has led more and more companiesto revisit their travel policy and compliance. If your companyhas not updated its policy in the past 12 months, now is thetime to do so.

• As airlines develop and implement menu-based pricingstrategies (e.g. technology that allows travelers to purchaseaisle seats, seats with more leg room, upgrades, meals, etc.at a premium), buyers are advised to add/update languageinto their travel policies to account for these industry

dynamics and educate employees regarding what is and what is not permitted according to corporate policy.

• With suppliers utilizing more sophisticated contractperformance reporting, buyers are advised to utilize Fair Market Share, or Quality Service Index (QSI) data to ensurecontract hurdles are realistic based upon an airline’s ability to service a company’s key travel routes.

• Stay abreast of route and schedule adjustments as theyoccur, and assess the impact that these changes may have on your company’s travel patterns and preferred relationships.These changes, minor as some may seem, present anopportunity to improve your air program.

• Buyers should consider exploring carriers on certain long-haul city pairs that have unique routing options but similartravel times and amenities. For example, the very crowdedand very expensive London-to-Sydney route has more than adozen options, all of which require one stop-over; howeverthey have similar total transit times and a wide variety of pricepoints, especially in premium cabins.

• For companies with a business class policy for long-haultravel but an eye on cost reductions amidst 5% to 8%forecasted fare increases, consider use of economy class forthe return portion of a business trip and/or considerbroadening the flight time window to qualify for the businessclass cabin.

• Utilize benchmarking of industry and volume peers todetermine if your company is paying more, on average, thanother companies. Take action to adjust travel policy andspending habits in order to reduce any gaps.


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Global Car Rental Overview

In spite of the increased costs of fleet, the car rentalindustry remains very competitive. We expect that rateswill increase at a lesser rate in 2008 than in 2007. TheNorth America market is expected to post low single-digit rate increases for 2008. Europe, Asia-Pacific andLA&C are expected to post even lower year-over-yearincreases. Local excise taxes and fees continue toinflate the overall transaction cost of car rental. Thereare over 100 different taxes and fees added to therental transaction in the United States alone. TheNational Business Travel Association (NBTA), along withothers, is attempting to put a bill through Congress tohopefully (at a minimum) cap the taxes. Nothing haspassed to date.

2008 Forecast: North America to See Car Rental

Rates Increase Slightly

Corporate car rental rates are positioned to trendupward at a slower pace for 2008.

There are three key drivers for this projection:

1) Increased cost of fleet (the cost of cars that the carrental companies purchase from the carmanufacturers is rising).

2) Softening business travel for 2008.

3) New competitive landscape.

Fleet costs are increasing at a slower rate than in 2007.We have also seen the manufacturers starting to movemore product to the car rental companies, whichimplies that there may be some downward pressure oncar pricing.

General Motors surprised analysts by posting a 6% gainin August sales. The increase was fueled by a 24% jumpin sales to rental car companies and a 16.6% rise in lighttruck sales, the Associated Press reports.

Higher interest rates have also raised the cost ofoperation for all car rental companies. Fleet costrepresents approximately 40% of the total cost of atypical car rental company.

We estimate that car rental rate increases in NorthAmerica will be in the range of 2% to 4% on a year-over-year basis.

We expect to see a slight increase in some negotiatedrates in 2007; however, the market is fragmented andfar from a level playing field. Some companies havebest-in-class agreements in place and others are payingmuch higher fees.

It is critical that larger accounts have agreements inplace with their car rental suppliers. Companies that buyoff-the-market will pay a much higher price. There arefew or no discounts available to companies that havenot negotiated rates in advance.

2008 Forecast: Global Car Rental Firms to See Small

Rate Increases

In Europe, we believe the car rental firms will remainmuch more competitive than in North America. Europehas not experienced the same increase in cost of fleet,and car rental suppliers are much more competitive. Lookfor rate increases of 1% to 3% on a year-over-year basis.

In APAC & LA&C, we also expect more competition forthe traveler dollar and generally lower increases allaround. Rate increases of 1% to 3% are expected.

Global Car Rental Forecast Increases for 2008


GLOBAL CAR RENTAL FORECAST

2% to 4%

1% to 3%

1% to 3%

1% to 3%

Forecast Increases for 2008

North America

Europe

Asia-Pacific

LA&C

Region


24

2008 Trend: Car Rental Firms See Ownership

Changes

There are major changes in the ownership structure ofthe car rental firms taking place in 2007 and 2008.

Hertz Rent A Car was purchased from Ford Motor inSeptember, 2005 and taken private by Clayton, Dubilier& Rice, the Carlyle Group & Merrill Lynch Private Equity.The private owners conducted an initial public offering(IPO) for Hertz late in 2006 and Hertz is currently apublic company again.

Avis and Budget Rent A Car have also seen ownershipchanges. Cendant has wound down its holdings and Avisand Budget are the last remaining part of Cendant. Thecompany currently operates as a public company underthe name AvisBudgetGroup. They started trading on theNYSE under ticker symbol CAR in September, 2006.

The Vanguard group which consisted of National and Alamo Rent a Car was private. National completed a marketing agreement with Europcar in the first quarter of 2007 which provided them with a very robustglobal offering.

On August 1, 2007, Enterprise Rent a Car (a privatelyheld firm) acquired National and Alamo. The combinationof Enterprise, National and Alamo makes up the largestcar rental firm in the world with approximately 46% ofthe U.S. market.

The effect of all these changes on the traveling public is still to be determined. Public ownership may actuallyincrease competition as the companies vie for marketshare and use their public funds to expand their service offerings.

Furthermore, the Enterprise acquisition of National andAlamo is a major move by Enterprise to enter thecorporate market. This is entirely consistent with ourprojection in 2007 that Enterprise was planning to makea strong move to enter the corporate market. Weexpect continued competition in the corporate market.It is important for companies to look closely at theirrental car programs.



25


The ability to negotiate a best-in-class agreement is still withinthe control of corporations. It is critical to understand yourcompany’s buying patterns and assure that your travel policytakes advantage of all the discounts the market has to offer.Following are some tips:

• Evaluate the company’s car rental spend and make sure thatthe company is providing the maximum amount of business toone or two primary car rental suppliers. Car Rentalcompanies have very good tracking systems and they knowwhen a company is not consolidating their rental businesswith a primary supplier. Companies that are not aware of thisneed to strategically manage their programs may missopportunities to secure the best rates.

• Ensure employees refuel before returning the car. This is anelement that should be part of every travel policy. Car rentalcompanies charge an average of $6.99 per gallon to refuelthe vehicle. It is possible to negotiate a fixed refueling rate,which can save a substantial amount of money, but this isonly available for larger volume accounts.

• Do not over insure. Determine if the company’s riskmanagement department wants to self-insure or if thecompany wants to negotiate insurance as part of thecorporate car rental agreement. Insurance coverage is muchless expensive when negotiated up front as opposed topurchasing the same coverage on an ad hoc basis. If the

company has chosen to self-insure—make sure employeesare not buying additional insurance at the counter. Theseadditional insurance charges can add up to $20.00 or moreper day in the rental car transaction. Reports can berequested from the car rental supplier to track this.

• Rent mid-size. Companies without a strong travel policy mayoften see abuse in the car rental sector. Who is really rentingthose Shelby Mustangs, Hummers, Jaguars & Cadillacs?About 65% of all corporate car rentals are at the mid-sizerate. Moving from full-size to mid-size can save up to 5% on acompany’s overall spend.

• Companies with over $150,000 in car rental spend, or about$1,500,000 in domestic air spend, have the ability to negotiatewith the car rental companies for improved rates. We believecompanies willing to work with one primary supplier willrealize benefits in rates, terms and conditions.

• Before negotiating with a car rental company, understandthe company’s car rental spending patterns. Is there asignificant amount of international volume? Does thecompany provide employees rental cars for long-term use? Where is there a need for car rentals (i.e. plantlocations, airports, FBO’s [Fixed Base Operators], etc.)? Themore a company can define and understand its need for carrental, the better the company can negotiate the bestpossible terms and conditions.



26

Global Hotel Overview

For 2008, the global hotel industry remains strong, andwe expect the negotiating conditions to continue to bein favor of the hoteliers. While hotel rates in all regionsare expected to rise, some market increases may not beas significant as experienced in 2007. Supply growth islikely to have some marginal benefit for the travel buyer,but the escalating costs of construction and labor arelikely to impede the overall pace of growing inventory.The most significant new growth worldwide has been inthe development of upscale, extended stay and selectservice hotels. In addition, chains are expected tocontinue to upgrade and renovate properties in the lowermarket tiers. The purpose of this approach is to offercompetitive alternatives for customers who are seekingvalue and traveler comfort.

Travel buyers will find that many hoteliers may onlyoffer negotiated rates to those clients who can movemarket share and/or fill rooms during off-peak nights.Leveraging long-term partnerships will be a criticalnegotiating component for travel managers, as it willallow them to negotiate aggressively.

For preferred hotel programs, introducing new hotels totheir portfolios that are more willing to offer competitiverates and amenities can level out the playing field.However, the challenge continues to be moving marketshare to the new properties as well as gaining buy-infrom the corporate travelers.

Forecasted increases across the globe are listed below:

Global Hotel Forecast Increases for 2008

2008 Trend: Last Room (LRA) Availability Status

LRA components are difficult to achieve and may come ata premium when they are offered. Hotels are restrictingLRA to high-volume clients with tightly managed pro-grams and, in some cases, limiting the number ofcorporate contracts altogether. Travel managers shouldresearch the level of inventory associated with LRA ratesat individual properties. In certain situations, properties areoffering a very limited amount of standard rooms whenoffering LRA rates, therefore making these ratesineffective (see Increased Revenue Management sectionbelow). Travel managers should push suppliers to openadditional room types within their inventory to increaseLRA throughout the year.

2008 Trend: Increased Revenue Management

Yield management has come of age in the hotelindustry which, in effect, has significant ramifications onthe availability of hotel rooms. Every prudent travelbuyer seeks to obtain LRA rates (see Last RoomAvailability Status section above) for their program.However, hotels have now become creative in definingwhat constitutes a standard room, thus allowing themto designate a lower percentage of rooms to which theLRA rate applies. Buyers will also find that hotels areimposing a minimum/maximum stay requirement ifdemand for the property is on the rise. We expectcontracts to increasingly stipulate that the corporaterate does not apply during high demand periods unlessthe traveler is staying two or three nights. Buyersshould address some of these contract inconsistenciesin the Terms and Conditions section of their hotel RFP.

2008 Trend: Eco-Friendly Lodging

Corporations and individual travelers have a heightenedenvironmental awareness. These concerns of globalwarming are expected to continue to drive hotelstoward “green” initiatives. Hotels that have adoptedgreen policies are targeting conservation in use of waterand electricity while recycling efforts and organic menusare also being explored. Many buyers are asking“green” questions as part of the hotel RFP and plan todirect business toward properties that comply.


4% to 7%

12% to 14%

18% to 22%

8% to 12%

5% to 8%

12% to 14%

18% to 22%

7% to 10%

North America

Europe

Asia-Pacific

LA&C

RegionHotel Mid-RangeForecast

Hotel Upper-RangeForecast

GLOBAL HOTEL FORECAST


27

2008 Trend: Hotel Renovations and Brand Upgrades

Hoteliers have taken full advantage of their prosperityby making major improvements to many of their brands.Contemporary designs and upscale amenities are acommon theme in renovations. In the lower-tier brands,travelers may be surprised to find refreshed rooms,upgraded bedding and in-room coffee makers. In uppertier properties, flat screen TVs and iPod outlets will bethe order of the day. While the traveler will reap thebenefit of these modern niceties, travel buyers shouldnote that renovation costs may be reflected in anincreased rate.

2008 Trend: Dynamic Pricing

The push toward dynamic pricing is expected to softenin 2008 as hoteliers struggle with articulating anddemonstrating the value of these contracts. We predicthotels will continue to explore opportunities to convertcorporate negotiated pricing to a percentage discount.However, it is more likely that modified dynamic pricingarrangements will emerge. For example, whennegotiating with a chain, the buyer may obtain staticnegotiated rates at properties with large volumes in keyhotels, and then a blanket dynamic-pricing agreementfor the remainder of the chain properties. As dynamicpricing continues to evolve, we anticipate buyers willdemand that hotels place parameters around the ratesto which the discount applies, such as capping of thebest available rate.

Global Hotel Forecasts

2008 Forecast: North America Hotels to Increase

Rates up to 8%

North America hotel rates are expected to increase by4% to 7% at the mid-range hotels and 5% to 8% at theupper-range hotels in 2008. While industry indicatorspoint to a challenging negotiating environment for travelbuyers, softening of the occupancy levels will provideopportunity to keep rates flat and/or increases containedin some markets.

North America Hotel Forecast Increases for 2008

In the United States, the hotel market remains healthy,favoring the hotel supply base. Other key factors likelyto define 2008 market conditions will include:

• Strong demand with low or slow growth in supply

• Stable occupancy which will remain near flat ascompared to 2007

• Rate increases during high demand periods

• RevPAR increases in major cities due to increase inoverall Average Daily Rate (ADR).

North America Country

Hotel Forecast Increases for 2008

Rates in primary U.S. cities are expected to rise asmuch as 14%. New York City, Chicago, San Francisco,Boston, Los Angeles and Phoenix will likely benefitfrom the strong projected performance of the luxuryand upper upscale segments. The increased usage ofeconomy hotels in secondary and tertiary markets isexpected to be notable as travel buyers seek to offsetrising costs in key markets.

We predict New York City hotels will be a particularchallenge (comparable to prior years), as they will seekto maximize revenues in high-volume periods.Occupancy remains high in the city as the market hasnot recovered from the mass conversion of hotels tocondominiums and property closings that occurred in2000 and 2001. Buyers can expect to see aggressiveterms and high pricing from New York hotels.


4% to 7% 5% to 8%North America



5% to 7%

4% to 6%

6% to 8%

5% to 7%

Canada

United States




28

United States—Key City Hotel Forecast Increases

for 2008

2008 Forecast: United States Hotel Occupancy

Drops

We anticipate that the U.S. hotel industry will experiencedeclining occupancy rates in 2008. Occupancy percent-ages are forecast to be down by 0.2 points over 2007,reaching 63%. The industry has seen steady occupancygrowth since 2004, see Exhibit 1.

Exhibit 1

Source: PricewaterhouseCoopers, Hospitality Directions–USA Edition,August, 2007

Average Client Negotiated Rates (ACNR) in the U.S. willremain near flat in 2008. Business travel in general

remains strong; however, the increase in supply inmany markets will impact the margin of ACNR increase.A 5.7% increase in ACNR is forecasted in 2008. Seetrending provided by American Express in Exhibit 2.

Exhibit 2

YOY increases of ACNR based on negotiated rates in primarycities–American Express Data

Occupancy rates will be the greatest in the upper/luxuryupscale segment at 70.9%. The midscale/economysegment follows this closely at 65.5%. The largestpercentage decrease in occupancy is expected to occur inthe Upscale/Luxury segment, down -0.5% in 2008 withmidscale following close behind with a -0.3% decrease.

Exhibit 3

YOY increases of ACNR based on negotiated rates in primarycities–American Express Data

The supply growth remains modest in most U.S. cities.Room supply numbers continue to increase, but thepercentage change from the prior year declined steadilyuntil 2005. A slight upsurge started in 2006 with a near


10% to 12%

2% to 3%

7% to 9%

4% to 6%

12% to 14%

9% to 11%

7% to 9%

8% to 10%

5% to 7% 10% to 12%

5% to 7% 10% to 12%

9% to 13%

9% to 12%

5% to 8%

7% to 11%

6% to 9%

4% to 7%

6% to 10%

6% to 10%

7% to 11% 4% to 8%

New York

Boston

Philadelphia

San Francisco

Washington

Chicago

Phoenix

Los Angeles

Dallas

Atlanta

Houston

CityHotel Mid-RangeForecast


61.4%

3.6%

2.1

63.1%

2.9%

1.8

63.4%

0.4%

0.2

63.3%

-0.0%

(0.0)

63.1%

-0.4%

(0.2)

Occupancy

Percentage Change from Prior Year

Percentage Point Difference from Prior Year

U.S. Forecast 2004 2005 2006 2007 2008

Average Client Negotiaged Rate

Percentage Change from Prior Year

U.S. Forecast

$100.71

4.8%

2005

$107.12

6.6%

2006

$112.68

5.0%

2007

$119.10

5.7%

2008

71.4%

65.7%

70.9%

65.5%

-0.5%

-0.2%

$132.11

$93.26

$140.20

$98.30

6.12%

5.4%

Upscale/LuxuryMidscale/Economy

Upscale/Luxury

Midscale/Economy

2008 Forecast 2007 2008

Segment Occupancy Occupancy

2007 2008

AverageClientNegotiatedRate

AverageClientNegotiatedRate

Change in Occupancy Points

% Change From PriorYear



1.0% increase, and growth accelerated a bit more in2007, up by 1.9%. 2008 supply is expected to growanother 2.1%. Despite the marginal increases in growthpace, supply growth remains moderate, which shouldease the market with occupancy relatively flat in 2008.The descending pace of the supply growth from 2001through 2005 is apparent in Exhibit 4.

Exhibit 4

2008 Forecast: Rising Demand Drives European

Hotel Rates Upward

Once again, Europe upward rate pressure is expected tobe felt due to rising business demand and highoccupancy rates. Overall, regional rates are expected toclimb 12% to 14% in the mid-range tier and 12% to 14%in the upper-range tier. In 2007, average rates increasedacross the European market with little exception.

Europe Hotel Forecast Increases for 2008

France—Rates in France are expected to continue to seehealthy rate increases. Demand remains strong. Paris inparticular is a popular destination for leisure and businesstravelers, putting strain on existing inventory. Paris alsoexperienced some of the highest rate increases inEurope in 2007. We predict Paris will remain a challengefor buyers in 2008. Rates in France will increase 9% to11% for both mid and upper-range hotels.

Germany—German rates are expected to increase againin 2008, but at a slower pace than in 2007, which wasaffected by an increase in VAT. Major German cities areexperiencing rate increases of up to 4%. Berlin is theexception, where rates are declining by as much as10% due to overcapacity.

Sweden—The hotels in Sweden are coming into 2008negotiations with increases of approximately 4% inAverage Daily Rate (ADR). Upward pressures in priceare due to a high increase in stays from both businessand leisure travelers alike. Construction of several largehotels in major locations and chain diversification arelikely to force competition.

Spain—Spain is expected to see rates increase inMadrid and Barcelona. Barcelona experienced doubledigit increases in 2007. We expect a more moderateincrease in 2008.

UK/London—Demand remains robust, and further rateincreases can be expected in 2008. In London,occupancy is exceeding 80%, and the city is often atfull capacity. Buyers are down-trading properties insearch of value, putting pressure on mid-range rates.London has experienced economic success in recentyears with limited new supply. Inventory stands to growsubstantially in light of pending 2012 Olympic Games.The Olympics are expected to accelerate hotel capacity,and all indicators position London as one of the hotelindustry’s development hotspots. Outside London, ratesare anticipated to somewhat stabilize.

4,100

4,000 -0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2001

Percentage Change from Prior YearEnd of Year Supply (000s)

4,200

4,300

4,400

4,500

4,600

4,800

4,700

2002 2003 2004 2005 2006 2007 20092008

U.S. Room Supply

(000s)

12% to 14% 12% to 14%Europe




30

Europe Country Hotel Forecast Increases for 2008

2008 Forecast: Asia-Pacific Hotels See Dramatic Rate

Increases Due to Regional Economic Growth

Southeastern Asia and Central and South Asiaexperienced some of the most dramatic rate increases in2007 worldwide. We expect business will not slow in thisregion as the economic growth continues. Leisuretravelers will continue to compete directly with businesstravelers for rooms, leaving hotels with the confidence toagain increase transient rates in 2008.

Asia-Pacific Hotel Forecast Increases for 2008

The landscape is changing, with traditional low seasonsshrinking in some markets, LRA definitions becoming verydubious in others, and hotels forging ahead with dynamicmodels in others, particularly where travel managerscannot demonstrate volume or discipline in their program.Hotel owners are enjoying prosperity, and 2008 promisesto be a year where they will raise the bar in Asia-Pacific.

Travel Managers need to come to the negotiation tablearmed with facts, as hotels are riding a wave ofconfidence. Understanding the difference between whatis negotiated and what rates are booked is both insightfuland at times frightful for travel managers. For example, inSingapore, negotiated rates moved up by an average of8% coming into 2007, yet it is not uncommon for bookedrates to yield at double that number.

In most cases, pricing pressure is expected to begreatest in the mid-range hotels, with a growing base ofleisure travelers and business travelers recalibrating their needs away from upscale properties. While thenegotiating climate is exciting and challenging, travelbuyers should prepare for stormy weather in terms ofpricing. Market intelligence and negotiation strategyshould minimize the unknowns and are the bestprotection against rising costs.

Across the Asia-Pacific region, real estate costs are high,construction costs are climbing and investors have manyoptions for their investment dollars. Hence, supplycontinues to grow at a slower pace than demand, causingupward pricing pressure at many key centers for 2008.

Australia is a diverse market, with cities like Perth andBrisbane seeking increases of 20% to 25% as they playrate “catch up” with their traditional big brothers ofSydney and Melbourne. Assurance of supply in boomcities is likely to remain a challenge for travel managers aswe head into 2008.

China is a rapidly growing market. Gateways like Shanghaihave felt the pinch of oversupply in 2007, and multi-nationals with established footprints in China arecapitalizing on the attractive pricing of domestic-brandedproduct. A global relationship with international chains willdo very little in a nation where non-Chinese interests ownalmost none of the real estate. The 2008 Olympics inBeijing is expected to have an extreme impact on supplyduring the months of August and September in 2008.Higher rates are expected in Beijing during this time.

Hong Kong will continue to sustain confidence in itsrates. Quite simply, the reluctance of travelers tocommute across the city continues to impede nego-tiation opportunities by constraining travel buyers tospecific properties.

India remains a challenge, as rooms continue to be scarcein most centers and price gouging is commonplace.Delhi, Mumbai and Bangalore remain critical, withlimited supply and strong demand growth causinganother year of significant rate increases. Buyers shouldbe aware that many hotels will begin to migrate the


18% to 22% 18% to 22%Asia-Pacific

RegionHotel Mid-Range Forecast


9% to 11%

7% to 9%

15% to 17%

7% to 9%

9% to 11%

10% to 12%

15% to 17%

8% to 10%

19% to 22% 21% to 24%

France

Germany

Sweden

Spain

United Kingdom




31

quotation of rates for all of their properties in 2008 toIndian Rupees (INR) instead of dual-currency quoting.Hotels may also migrate all existing client agree-ments which are quoted in USD to INR effective from 1 October 2007.

Japan has felt left behind in terms of rate movementsin the past couple of years, yet the Land of the RisingSun is expected to see a modest appreciation of ratesin 2008.

Singapore continues to grow its position as a regionalbase for many companies. In addition, 2008 isexpected to be a big year for events, further exacer-bating supply shortages.

Asia-Pacific Country Hotel Forecast Increases for 2008

2008 Forecast: Low Supply Drives Rate Growth in

Latin America & the Caribbean Hotels

Major hotel chains are ramping up their presence acrossLA&C. However, low supply is expected to strainoccupancy and force another seller’s market. Domesticand international travel into the region remains stableand is likely to keep occupancy levels near flatcompared to prior years. There is upward rate pressuredue to inflation and variations of the economic andfinancial scene. Buyers can expect to see more mid-scale properties springing up across Central andSouth America offering both variety and value. Manynew properties are expected to open toward the close of 2008.

Overall, results will vary by country; however, rates areexpected to increase at an average of 8% to 12% in themid-range tier and 7% to 10% in the upper-range tier.Occupancy is expected to remain flat or decrease in theregion overall while RevPAR will rise 13%.

Latin America & the Caribbean


Latin America & the Caribbean Country



9% to 14%

11% to 16%

12% to 16%

34% to 38%

9% to 14%

9% to 14%

13% to 17%

38% to 41%

7% to 10% 6% to 9%

27% to 29% 27% to 29%

Australia

China

Hong Kong

India

Japan

Singapore

CountryHotel Mid-RangeForecast


8% to 12% 7% to 10%Latin America

RegionHotel Mid-Range Forecast


10% to 15%

6% to 8%

2% to 3%

5% to 10%

5% to 7%

3% to 5%

Argentina

Brazil

Mexico




32


While buyers are expecting yet another difficult negotiatingseason, they should also be aware that opportunities toleverage spend will arise as occupancy softens. Occupancylevels fluctuate by market; therefore, industry intelligence iscritical to understanding each market’s status. Information iscritical during the negotiation process. Buyers should bearmed with market knowledge and remain persistentthroughout the process. Corporate clients who understandtheir unique leverage position in the marketplace and who arewilling to try a variety of cost-containment strategies will farebetter than those who don’t.

Although the majority of preferred hotel programs continue to benon-mandated, adherence to policy and a plan towardcompliance will become the focus of many corporate strategies.Strong policy directives and quarterly reviews of travelercompliance will be essential for buyers who wish to influencethe negotiating process in their favor. As buyers focus oncompliance, they should also plan to communicate this focus tothe supplier base. Hotels look for clients that exhibit highcompliance rates. Any positive policy changes that directlyimpact the hotel environment for making hotel bookings shouldbe communicated to suppliers. In addition, compliancecommunications should also be directed to the companytravelers, with explanations of how their actions can drivesavings and influence robust negotiations in the future.

Key strategies that buyers should consider implementing are:

• Benchmark the current hotel program to understand whereopportunities for savings exist. Robust market intelligence willallow travel buyers to develop a focused strategy and haveknowledge of negotiating potential in each market. Thestrategy may be to hold rates flat in the top five markets, whileconsolidation may be the goal in secondary markets.

• Know the history of negotiated rate changes at key hotelsfrom past years by reviewing year-over-year comparisons. Ifdrastic rate changes were the outcome of recent-yearnegotiations, then rates may be inflated as compared to otherlike companies.

• Gather 2006 full-year data and/or six months of 2007 data tounderstand the number of room nights and amount of spend ineach market.

• Amenities are still a popular approach for adding value to client programs. Hotels that are not willing to negotiate on rate may consider offering additionalamenities to entice business. However, hotels will not offer all requested amenities on a gratuitous basis. Beselective with requests (i.e., only ask for items important to travelers).

• Leverage total chain spend to negotiate the best possiblerates in key markets. Chains should value the totality ofbusiness and be willing to offer the most attractive rates in acompany’s top markets.

• Consider adding new hotels (including lower tier) to thesolicitation mix. This will increase competition while allowingbuyers to compare current preferred rates to those of hotelsseeking inclusion in the company’s preferred program.

• With occupancy high in many markets, there can be benefitsfrom selecting more hotels to be preferred in certain cities.This can potentially drive competition and also ensure roomsare available when travelers book.

• Conduct a thorough hotel spend analysis at the onset of theannual RFP process. It is important to be armed with the mostcurrent data on travel patterns.

• Always engage in a rate audit process once programs are inplace. We have seen the erosion of savings when negotiatedrates are not loaded and cannot be booked via the GDS oronline booking tool.

• Encourage adoption of the online booking tools. Thismethod of booking can lead to higher compliancenumbers.

• Prepare a negotiation strategy for every market. All marketsare different, so it will be important to understand the variousdynamics impacting rates.



GLOBAL FORECAST METHODOLOGY

Projections were based on a combination of statistical forecasting, in-depth research

of supplier markets, regional economic trends, interviews with American Express

industry analysts and analyses of reports generated within and outside American

Express. Smith Travel Research was also utilized for hotel research into specific

markets and trends.

As indicated above, the forecasts and projections provided in this report are based

on information gathered from a number of different internal and external sources,

and no representation or warranty is made as to the accuracy of the forecasts or

projections made herein. In addition, actual changes in business travel costs could

vary significantly from forecasted data, particularly as a result of unforeseen future

political, economic and/or environmental events. All ranges represent forecasted

year-over-year increases.



About American Express Business Travel

American Express Business Travel, a divisionof the American Express Company, is dedi-cated to providing peace of mind to clientsas they achieve the greatest possible valuefrom their investment in travel through in-creased cost savings, outstanding customerservice and greater spend control. For smallbusinesses, medium-sized enterprises andmultinational corporations, American ExpressBusiness Travel provides a combination ofindustry-leading booking technology, travelmanagement consulting expertise, strategicsourcing and supplier negotiation support,and customer service availability around theworld, around the clock, online and offline.

American Express operates one of theworld’s largest travel agency networks withover 2,200 travel service locations in over140 countries and territories worldwide. TheCompany processed over $21.8 billion inglobal travel sales in 2006.

American Express Company is a diversifiedworldwide travel, financial and network serv-ices company founded in 1850. It is a worldleader in charge and credit cards, TravelersCheques, travel, business services and inter-national banking.

Regional American Express Headquarters

North America

American Express200 Vesey StreetNew York, NY 10285www.americanexpress.com/businesstravel

Europe, Middle East and Africa

American Express Services Europe Ltd.Belgrave House76 Buckingham Palace RoadLondon SW1W 9TQwww.americanexpress.co.uk/businesstravel

Japan, Asia Pacific and Australia

American Express International, Inc.175 Liverpool StreetSydney NSW 2000www.americanexpress.com.au/businesstravel

Latin America & the Caribbean

American ExpressPaseo de la Reforma 350 Piso 17 Col. Juárez, CP. 06600 México DF www.americanexpress.com.mx/businesstravel

For more information on how we can help you optimize your air, car, hotel and meetings spend,

as well as manage or improve your Corporate Social Responsibility, policy, compliance, change

management and online program optimization, contact your American Express Business Travel

representative or email [email protected]

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