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SHORT-HAUL air fares from the UK will drop but hotel room rates will rise, according to an American Express 2005 global business travel forecast.

The travel management company released its latest annual forecast this week including, for the first time, predictions for Latin America and the Caribbean.

Amex predicts business travel demand will outpace supply and push long-haul air and hotel rates up in the next 12 months.

However, the pace of the industry’s recovery will vary greatly based on region and country. Director of global consulting services Matthew Davis said increased competition in markets including the UK are likely to offset any rise in business travel costs.

"The business travel industry is certainly in recovery mode," Davis said.

Asked about the market for UK airlines, he said: "We see consolidation and rising prices and we do expect to see fewer players."

He advised travel buyers to "lock in (hotel) rates early because last-minute rates are not going to be there this year".

Davis predicted low-cost carriers would be forced to raise short-haul prices in 2005 after fuel costs hit a record $55 per barrel for the first time this week. He said "typically" low-cost airlines spent 15%-16% of their total expenditure on fuel.

"But under these conditions we could be seeing these carriers spending 20%-25% of their total costs on oil and fuel."

According to Amex, pricing trends will be "volatile" as low-fare carriers across western Europe continue to drive down prices on short-haul, domestic and intra-European routes, although it could not say which routes would be most impacted.

"We are expecting to see the UK lead the way in terms of price changes."

Davis said he expected to see fares remain low "for a very long time", but predicted they would increase by the end of next year.

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