Travel costs took a hike last year, according to the latest report from American Express Business Travel, with international airfares, international hotel rates and U.S. budget-tier hotels showing the most dramatic increases.

In a report released last week, American Express blamed strong buyer demand taxing thin inventory and increased supplier operating costs as the driver behind the bigger bills.

“In line with our predictions, capacity constraints, strong demand and high fuel costs prompted transient travel prices to climb in 2006,” said Mike Streit, vice president of American Express Business Travel Advisory Services. “Companies, however, heeded the warnings and looked internally to tighten policies, strengthen compliance and rein in indirect expenditures to hedge against the expected cost increases and challenging negotiating environment. These employee change management efforts helped to soften the expense impact and keep executives on the road.”

The end of 2005 marked a six-year low in the average airfare paid by corporate travel buyers for U.S. domestic flights, the study said. By the end of 2006, the average airfare paid jumped $15 from $216 to a three-year high of $231. The instability of fuel prices combined with record-high load factors caused airlines to increase fares throughout the year.

SMART SPEND

“Companies began buying smarter and more aggressively managing employee compliance,” said Streit. “During the last quarter of 2006, our data shows that clients had greater usage of discount coach fares and purchased more tickets in advance. These are some of the strategies we encourage clients to use to help avert rising costs.”

Budgets for international airfare took the biggest hit; when comparing rates between 2005 and 2006, the increase was 5.8 percent. Over the last two years, the international airfare paid has risen by 12.8 percent following several years of relatively flat rates. In 2006, the international average airfare paid was $1,707, up from $1,468 in 2000.

Internationally, Asia continues to show the greatest demand increase regionally, particularly in China and India. Fares paid to this area increased 11 percent, the highest average increase in any region.

PAY TO STAY

Costs for international hotel bookings continued to climb, ending 2006 up 8.5 percent, or $18 from 2005. International average booked rates ran

2000 - $190
2001 - $192
2002 - $188
2003 - $195
2004 - $197
2005 - $212
2006 - $230

“The industry of business travel remains unpredictable,” said Streit. “The best way for companies to prepare for the unexpected is by taking a holistic approach to travel management, focusing on strategies that will help them make the most of every travel and entertainment dollar they invest.”