Airfare index fails to capture picture of fresh options
The trend in air fares is up, up, up. So says American Express, which has bravely tried to track the movement of air fares in its quarterly Airfares Index (AFI).
The index enables those responsible for a company's travel budget to check these fare changes against their own travel spend. Thus, if your airfare expenditure has increased 5 per cent, and the AFI average shows a 7 per cent increase, you are controlling your travel costs well.
The current AFI shows the Hong Kong market is relatively better (for travellers) than in the region as a whole. Amex says both business class and discount economy fares increased 2 per cent in the region over the past year, but less than 1 per cent in Hong Kong.
Peak season excursion fares were also better (down 1 per cent, compared with 2 per cent growth regionally), but off-season excursion fares were similar (both Hong Kong and the region up slightly less than 1 per cent).
Unfortunately, its AFI research seems flawed from the start. Its biggest shortcoming is the source of fares, which appears to be based only on those obtained from its own travel agencies. Despite the company's size (one of the world's top three travel agency groups, and possibly the largest), this is a small part of total travel activity.
As internet bookings have started to grow, this is not a reflection of what is happening on the street. Amex reasons that many discounted fares are not suitable for most business travellers - because they have too many conditions. And the AFI is targeted at the business traveller.
But travel trends are changing, partly because of the arrival of low-fare airlines which have prompted their big competitors to reduce fares, and partly because there is greater pressure on controlling corporate costs.
More business travellers are willing to buy fixed-flights tickets - because the saving is so great - and adjust their business activity to allow for the less flexible terms.
The result is lower prices, with some regional fares having sunk by 50 per cent this year - in shocking contrast to the AFI's 1 per cent increase over the past 12 months.
So a contrary view to the AFI findings would be that same-store corporate air expenditure should have fallen around 10 per cent over the past year (excluding fuel, security and similar charges).
NO MORE KOWLOONS
Clement Kwok, head of the Peninsula hotel group, affirms that the group will concentrate on expanding only its main Peninsula brand.
'The Kowloon [hotel] is fine as an investment,' he said. 'But not as a leaping board for a brand.'
Despite generally better results and growth for budget- and mid-market hotels, Peninsula wants to focus on its luxury brand. As a result, expansion in hotel numbers at the group will be slow - because it is more difficult to add hotels at the top of the market.
Mr Kwok said he would be happy if the company had 11 to 15 hotels over the next five years. It currently has nine.
Compiled by Murray Bailey, research director and editor, Travel Business Analyst
