The travel sector shows signs of a positive upswing when looking at Q3 2010 compared to Q3 2009, according to a recent report from American Express. “Spend Sights Report Travel Industry” indicates business spending appears to be leading ahead of consumers across all segments of travel, suggesting corporate budgets are loosening in comparison to recent years.
Business Class Air Travel Soars
Overall airline travel saw a decrease in first class ticket purchases, down 1%, contrasted by a significant 60% jump in purchase of business class tickets. Economy class tickets saw a 7% uptick overall.
Looking at specific consumer demographics, affluent consumers’ overall spend on airline travel rose by 4%, with a 43% increase in spend on business class tickets. Average consumers spent 6% more overall, following the same trend as affluent consumers with a 40% increase in business class tickets. The former group spent 6% less on first class tickets, and the latter spent 4% less.
Corporate travelers echoed the individual consumers’ air travel choices. Small businesses spent a significant 71% more on business class airline tickets, and large businesses spent 68% more on this ticket classification. Small businesses also decreased spend on first class tickets by 4%, while large businesses increased first class spending by a modest 10%.
Large Biz Drives Car Travel Growth
Not only were businesses spending more on air travel, but the trend extended to corporate car rental as well. Average consumers rented more than affluent consumers, and large businesses rented more than small businesses.
Affluent consumer spending on car rentals decreased by 1%, and average consumers increased spend in this category by 1%. Small business increased car rental spend by 5%, with large business increasing spend on car rentals by 9%.
Overall spend on car rental increased 3% in July 2010, 2% in August 2010, and decreased 1% in September 2010, indicating a slight overall downward trend as the summer travel season closed.
Furthermore, American Express data shows repeat auto renters on the rise. Small businesses with three or more rentals were up 10%, and large businesses with the same number of rentals were up 11%.
Large Biz Also Sails Away
The cruise industry saw healthy increases from all customer groups, with large businesses increasing frequency of cruise trip activity by 47% compared to Q3 2009. Small businesses increased cruise frequency 9%, and average consumers increased their cruise frequency slightly more (7%) than affluent consumers (5%).
As would be expected considering heightened activity, overall spend per cruise was up within each segment; 7% for average consumers, 13% for affluent consumers, 8% for small businesses, and 18% for large businesses.
In addition, average consumers and small businesses taking three or more cruises increased by 13%. Meanwhile, affluent consumers taking two cruises in Q3 2010 increased by 7%, while those taking three or more cruises increased by 9%.
Luxury Lodging Grows Most in Spending
Spending on luxury lodging increased the most of all lodging categories with a 9% uptick. However, upscale and economy were not far behind with increases of 8%, and the midscale bracket showed the lowest increase at just 5%. Economy lodging showed the highest increase in consumer spend per visit with a 9% jump. In particular, affluent consumers spent 17% more on economy accommodations in Q3 2010 than in Q3 2009.
Large businesses posted an 11% increase in lodging spending overall, with small business trailing slightly with an 8% increase. Small businesses had an 11% increase in luxury lodging spend and 9% increase in economy lodging. Large businesses had the largest increase, 19%, of economy lodging spend among business travelers – even though they continue to also book luxury accommodations, up 16%.
Meanwhile, average consumers were up 6% in luxury lodging spend, while the ultra-affluent only rose 4% in this category. This mirrors overall lodging spend increases for these groups at 5% and 2%, respectively.
US Hotel Rates Rise
Hotel rates appear to be on a slight rise domestically in the US, growing 3% year-over-year from $144 to $148 in Q3 2010, according to other recent American Express data. This follows a 2% year-over-year drop from $147 to $144 in Q3 2009. American Express analysis indicates an increase in hotel closures and a drop-off in the hotel construction pipeline due to the Great Recession will put some constraints on capacity moving forward. American Express Global Advisory Services has already seen an average increase of more than 7% in corporate rates worldwide this year for 2011 business travelers.
About the Data: Data are derived from transactions on the American Express payment network projected to reflect the general population in the industry, consumer and business segments shown. Average consumers are all consumers regardless of spend living in the US. Affluent consumers are the highest spending US consumers living in the most affluent neighborhoods. Small businesses are US businesses with fewer than 100 employees, and large businesses are US businesses with more than 100 employees.