‘Sharp’ increase in travel costs forecast - Supply Management

‘Sharp’ increase in travel costs forecast

Will Green is news editor of Supply Management
7 August 2018

Travel prices are forecast to rise “sharply” in 2019, with flights increasing on average by 2.6% and hotels up 3.7%.

The Global Business Travel Association (GBTA) and Carlson Wagonlit Travel (CWT) report said costs were being driven up by global economic growth and rising oil prices.

Airfares are also likely to become more expensive due to competitive pressure from a shortage of pilots, potential trade wars, and fare segmentation, which gives travellers more options and price points.

The aviation sector will be shaped by the introduction of ultra-long-haul flights and increasing competition from low-cost carriers, which are not only multiplying but also competing for long-haul flights. The push towards New Distribution Capability, a data standard that enhances communications between airlines and travel management companies, is also having an impact.

Airfare rises

Airfare prices in Asia Pacific are expected to rise 3.2% in 2019. China (3.9%) New Zealand (7.5%) and India (7.3%) are among those expecting to see notable price rises. Japan is the only exception with prices expected to fall -3.9% as it adds capacity in anticipation for the 2020 Olympics.

In Western Europe prices are expected to increase 4.8% in 2019, with “especially pronounced” increases in Norway (11.5%), France (6.9%) and Spain (6.7%). Eastern Europe and MENA however will see declines of 2.3% and 2% respectively.

Latin America is expected to see a drop of 2% in 2019, with the exceptions of Mexico, Colombia and Chile, which will see rises of 0.1%, 1.2% and 7.5% respectively.

North America is expected to see a modest rise of 1.8%.

Hotel prices

The overall increase in air travel is expected to fuel demand for rooms, causing price increases in the hotel industry. The hotel industry will also be shaped by an increase in demand for mobile bookings and travel apps and new developments in personalised guest experiences.

In Asia Pacific hotel prices are predicted to rise 5.1% in 2018, with a notable increase in New Zealand (11.8%). Japan is expected to be an exception, with prices expected to fall 3.2%.

Hotel prices in Europe and MENA are expected to mirror air fares. Prices in Western Europe are expected to increase 5.6%, with Norway (11.8%), Spain (8.5%), Finland (7.1%), France and Germany (both 6.8%) leading the pack.

Prices are expected to decline 1.9% in Eastern Europe and 1.5% in MENA.

Latin America is expected to see prices fall 1.3%, with declines in Argentina (-3.5%), Venezuela (-3.4%), Brazil (-1.9%) and Colombia (-0.7%). There will be some exceptions, including increases predicted for Chile (6.4%), Peru (2.1%) and Mexico (0.6%).

North America is expecting hotel prices to rise 2.1%, including 5% increase in Canada and 2.7% in the US.

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