Pick-up in demand causes rise in travel prices

16 June 2011

16 June 2011 | Angeline Albert

The average cost of both an airline ticket and a hotel room has increased as demand from businesses rises.

According to the 2011 Corporate Global Travel Benchmarking Study published by Egencia, average daily rates at top destinations in Europe, North America and in Asia-Pacific all rose, reversing last year’s downward trend. These increases were attributed to growing corporate demand, a cut in the level of new supply, better occupancy and higher air capacity.

In addition, average ticket prices charged by airlines to specific destinations, particularly to Dublin, Munich and Frankfurt, and most routes departing from North America, have gone up. As well as higher demand, rising fuel prices, consolidation between carriers and tight capacity were also factors in the rise.

However, the study also found that increased competition in some areas of Europe was actually driving prices down. Low-cost carriers and high-speed rail are providing alternatives that create a competitive market.

“In Europe, contrary to last year, the hotel pricing landscape has increased. But air trends remain more or less the same,” said Christophe Pingard, senior vice-president, Egencia EMEA and APAC. “Hotels seem to be driven mostly by demand pattern. Air seems more complex, with two opposite trends: on one hand prices rising due to fuel and tax increases, on the other hand low-cost airlines and high speed rail pushing prices down.”

In addition, a survey of 350 travel buyers found 54 per cent believed the amount of travel by staff at their company would rise during the remainder of 2011.

The challenges reported by purchasers remain roughly the same as a year ago, with cost control remaining top (79 per cent). But there was more focus on both traveller satisfaction (43 per cent) and compliance and policy enforcement (42 per cent). Getting the full picture of travel spend was still an issue for 40 per cent.

The report concluded that in a period of constrained capacity and rising ticket prices, booking in advance becomes even more critical. It also recommended buyers monitor airline ancillary charges, including baggage fees, reservation change fees, and standby passenger fees. Encouraging travellers to be flexible about their plans is also important.

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