Business travel costs predicted to rise

27 February 2018

Air and hotel rates are expected to rise overall across the world in 2018, according to panellists at London's Business Travel Show.

Speaking at a forecasting forum last week, Jennifer Charlton, global supplier relations vice president for American Express Global Business Travel, and Geraldine Valenti, EMEA senior director for CWT Solutions Group, predicted positive growth for the air and hotel industries. 

North America

Charlton said growth across North America would see a 3% increase in airfare prices, but a glut in supply has seen American carriers trying to maintain their market share through "creative" pricing.

“It’s a high demand market at the moment but there is a surplus of supply and as a result, the American carriers are very aggressive to maintain their market share so we are seeing lots of pricing activity, lots of creative pricing, “ she said.

“Even for just $2-$3 we are seeing customers move to get the cheaper prices, so lots of activity in the region at the moment, but not necessarily over-inflated prices.”

With hotel rates, Valenti said prices in region would increase by 2.9%, with buyers’ interests shifting to more dynamic pricing over traditional corporate rates.

“Travellers have become a bit more opportunistic and willing to buy different rates rather than relying on corporate fixed rates. It is an interesting trend and there are times where you should be looking at dynamic rates for hotels versus times where you want to be much more controlling of your spend and want your firm fixed corporate rates,” she said. 

Valenti added that US buyers have an increased interest in traveller experience and all players in the hotel food chain were now focusing on that aspect through personalisation and smart technology, which may impact hotel rates. 

Europe

Charlton said Europe will see an average 3% increase in airfare prices across the region.

“Europe was particularly strong last year where we saw lots of new products coming into the market and the quality that people are flying now is improving – we predict that to continue on this year also,” she said.

Eastern Europe will see a 6.6% rise in hotel prices and Western Europe a 6.3% increase. 

Valenti said she did not expect Brexit to have an impact on pricing this year as it has not come into play as yet and the limited amount of new properties entering in the market would drive higher occupancy rates in existing hotels. 

“The summer [football] World Cup in Russia is going to have a temporary impact on hotel rates and we have to take it into account although I think for buyers, it's possible to avoid Russia during those four weeks,” she said.

“There are a limited number of new properties coming to the market, hence the growth rates we are expected to see.”

Asia Pacific

Charlton said she predicted only a 1% price increase in airfare prices in the Asia Pacific region, as there is a glut in supply, which can be beneficial to buyers when it comes to negotiating with their carrier. 

“Here we have an overcapacity problem so there was a lot of capacity pumped down to China and Asia and everybody is fighting for that space now and what it means for the buyer is it will allow you to have the opportunity to negotiate on corporate pricing,” she said.

She added that it was difficult to predict what is going to happen in China, as it performed unexpectedly well last year, but what they had seen is a growing middle class being particularly active across the region, with particularly popular routes being Tokyo, Seoul and Sydney. 

Valenti said that in contrast, Asia Pacific hotel pricing would be more dynamic in 2018 than airfares and would increase by 3.5% to reflect an increase in demand.

“As Asia is growing as a market in itself for its own population, we are seeing an increase in demand intra-continent and seeing multi-year deals as a growing trend – more and more of the hotel industry is going into two-year deals,” she said.

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