Advito Forecasts Slight 2010 Airfare Rise, Hotel Rate Dip

European travel buyers next year will encounter moderate airfare increases and small average daily rate declines in hotels as suppliers begin to leverage improving demand to help boost their prices, which had been deflated during the economic and corporate travel downturns of 2009, according to corporate travel consultancy Advito's preliminary industry forecast, which it released to EuroBTN this week.

Globally, fares are expected to increase anywhere from 1 percent to 6 percent compared with 2009 ticket prices, according to the forecast. European economy class airfares are expected to rise 2 percent on regional and 2.5 percent on intercontinental trips. Business class fares in Europe will rise 1 percent regionally and 3.5 percent on intercontinental routes.

Upward airfare pressure is being driven by slowly improving demand and carrier capacity cuts. According to OAG, international services to and from Europe for October 2009 have 1.4 percent fewer flights and 1.1 percent fewer seats than in October 2008. Within Europe, flight schedules this month have decreased 6 percent and seats have dropped 4 percent year over year.

"It will allow the airlines to start turning off some of the low-fare inventory that they held open for an inordinately longer period of time in 2009," said Advito vice president of business solutions Bob Brindley. "It wasn't so much the published fares changing that drove average fare decreases during 2009, it was that because of reduced demand carriers were leaving their low-fare inventory open for longer periods and selling more of their business at those lower fares to fill up their airplanes."

Advito also projects rail travel prices to experience temperate increases. According to Brindley, German national rail company Deutsche Bahn will have an average fare increase of 1.8 percent. The regulated U.K. rail networks are slated for fare rises of 1 percent to 1.5 percent. However, some deregulated networks could have double-digit percentage point increases driven by changes to restrictions put on advance purchase tickets, Brindley said.

In European hotels, travel buyers will see continued decreases in average daily rates, including drops of 3 percent in Spain, 0.6 percent in France and 1.2 percent in the United Kingdom.

The forecast is based on Advito's client rate projections for 2010 compared with this year, relatively steady oil prices of $60 to $70 per barrel and other economic indicators including the International Monetary Fund's World Economic Outlook released this month, which projects a 2010 world gross domestic product growth of 3.1 percent and a European GDP growth of 0.3 percent year over year.