Though
fears of more turbulence in global economies, even if ultimately only fears,
are expected to "slow growth in travel for the rest of this year and 2013,"
BCD Travel consultancy Advito predicted corporate travel pricing next year
generally would experience modest increases. Citing limited supply growth, or
possibly even reductions in certain spots, Advito's new forecast suggested the
cost of travel—coinciding with "moderate demand growth"—will maintain
a trajectory "either in line with or a little faster than inflation."
That
means travel buyers in all regions should prepare for 2013 airfares that are
higher than this year's by mid-single-digit percentages. Increases in hotel
rates, according to Advito, will be more varied, ranging from just a few
percentage points in Europe to double-digit percentages in Latin America.
Carlson
Wagonlit Travel in July also issued an industry forecast predicting modestly higher corporate travel prices in most global regions.
North America
Advito
projected intercontinental airfares from North America will increase 3 percent
for both business and economy class. Within the region, business airfares also are
expected to rise by 3 percent while economy fares increase by as much as 5
percent. Specifically within the United States, Advito projected average air price
hikes between 4 percent and 5 percent.
"Airlines
have kept the number of seats they sell under tighter control than at any time
in living memory," Advito wrote. "They are quick to reduce or cancel underperforming
services and cautious about launching new ones. Disciplined capacity management
in the United States in particular has led to several domestic fare increases
in 2012." The consultancy also noted that carriers aggressively are
managing fare buckets, which often shuts out late-booking business travelers
from lower-priced inventory.
However,
following the successful fare hikes this year, Advito noted "a concern
among carriers" that the corporate market "may be approaching the
limit of what it is prepared to pay before opting to cut travel instead."
Of
course, ancillary fees are a growing factor in determining corporate air costs.
"Expect even more of them," Advito cautioned.
Meanwhile,
the next round of industry consolidation appears underway, though Advito
suggested that a merger between US Airways and bankrupt American Airlines,
should it come to fruition, "would probably not have any practical implications
for buyers until 2014."
On
the lodging front, Advito projected a 6 percent to 7 percent jump in the
average daily rate paid by corporate travelers in North America, explaining
that "there is little sign of significant numbers of hotel openings."
In
terms of meetings, Advito cited "growing demand and stable supply" in
predicting that 2013 rates would rise faster than they did in this year. "Once
again, rate growth will be highest in major cities like New York, and also in
luxury destinations," it concluded.
Meanwhile,
amid "fierce competition" in the car rental sector, the forecast
called for stable pricing, a continuation of an ongoing trend. "Long-term,
the effective completion of consolidation of the marketplace following the
Hertz/Dollar Thrifty deal could put upward pressure on corporate rates,"
Advito added, though acknowledging that Dollar Thrifty has been a minor player
in that market segment.
Latin America
South
of the border, "where demand is most vibrant," prices will increase more
quickly than in other regions. Average daily hotel rates overall, for example,
will rise between 8 percent and 14 percent, according to Advito, with prices in
Brazil soaring as much as 22 percent.
At
the same time, airfares on average are projected to increase by 6 percent or 7
percent.
Europe
On
the other end of the spectrum, Europe will see "low or non-existent demand
growth," according to Advito, and airfares there on average are forecast
to rise by 2 percent or 3 percent.
But
there are other factors in play. The continent's Emissions Trading Scheme could
lead airlines to raise prices to offset the costs they will incur—should
pressure from other countries fail to persuade the European Union to remove
aviation from the regulations. "We expect most airlines will pass on their
ETS costs as another surcharge, so prepare to see a small rise in total ticket
price for flights to, from and within the EU from next year," Advito
wrote. "We estimate that it will amount to roughly €1.50 per passenger for
short-haul flights and €12 for transatlantic flights, less than 0.5 percent of
the average total fare. Fuel surcharges and departure taxes cost much more."
Indeed,
the sum total of extra charges, "especially departure taxes in the United
Kingdom, has reached a point where it is affecting decision-making on whether
the cost of a trip can be justified," Advito reported.
It
also suggested that "booking earlier will be especially important in Europe
as mainstream airlines transfer more of their capacity to low-cost subsidiaries
that don't offer corporate deals."
On
Europe's rails, Advito has found that fares on average this year are up 3
percent to 5 percent, "and a similar range is expected for 2013."
For
hotels, the forecast told buyers to expect overall increases between 2 percent
and 4 percent—with the usual country-by-country variation. Denmark and France,
for example, could see ADR increase as much as 4 percent while Spain, Italy and
other Southern European countries experience only a one-percentage-point bump.
The
region's meetings sector, meanwhile, has seen a "recent softening in
demand," according to Advito, however, "the strength of the dollar
against the euro means Europe has become a more financially attractive
destination for U.S. buyers than it has been for several years." The
growth in meeting rates generally is expected to be "in line with
inflation."
Middle East
For
the Middle East, Advito projected a 5 percent increase across regional and
intercontinental airfares, and for both business and economy tickets. Its
forecast noted that fast-growing Emirates, Etihad and Qatar airlines "have
reached a stage of maturity with their route networks where it makes strong
sense to add agreements with one or two of them to existing deals based around
the three global alliances. Not only are they keenly priced but they are very
helpful for avoiding giving too much market share to other groupings and
keeping corporate pricing competitive."
Hotel
rates in the region are expected to increase 5 percent to 10 percent.
Asia/Pacific
Advito
predicted average corporate ticket prices in Asia/Pacific generally would grow
by 3 percent to 4 percent—"rising roughly in line with inflation"—under
an assumption of "strong long-term growth." The company has observed
Chinese carriers "learning fast" and "looking to build
relationships with multinational companies," as well as an influx of
low-cost carriers around the region.
Average
2013 hotel rates, according to Advito, will be 5 percent to 8 percent higher
than this year, with pockets of even larger increase. Australia, for example,
"is experiencing a business travel boom because of the strength of its
mining sector," and buyers there should expect hotel negotiations to be
"particularly tough" and average rates to jump as much as 12 percent.
Additional Commentary
Oil prices: Advito calculated
that a $10 increase in the price of a barrel of oil translates to a 3 percent
increase in airline ticket prices. But while noting that the Economist
Intelligence Unit expects oil prices to drop in 2013, and therefore fuel
surcharges levied by airlines shouldn't increase, the consultancy cautioned
buyers not to "hold your breath: Airlines have proved much slower to bring
surcharges down than to put them up."
Airline joint ventures: Advito said that
during the past year it has "seen more evidence of the JVs setting tougher
targets for clients and enforcing them more rigidly, while moving to lower
discounts. They are also demanding more support from clients on all the routes
they serve, even where they do not offer the best deal or most efficient
schedule on that route," further complicating discount program structures.
"That said, the joint ventures have still not been able to turn the
pricing screw on clients as much as they hope," owing to weak
macroeconomic trends and strong competition from unaligned Middle Eastern
carriers.
Hotel negotiations: Generally speaking,
"negotiations for 2013 corporate rate programs will be the toughest for many
years, with supplier and buyer expectations far apart," Advito wrote.
Hoteliers, it added, "will achieve higher rate increases than for 2012 but
not as much as they are looking for. Demand is still not as robust as suppliers
would like. If there is a silver lining to the recent cloud of bad economic
news, it is that the figures are appearing at just the right time to frighten
hoteliers as they head into negotiations for 2013."
'Secondary spend': Advito's 2013
forecast also explored corporate travel expenses related to dining, mobile roaming
and data fees and ground transportation (other than car rentals). It estimated
that those categories together account for about 18 percent of U.S. corporate
travel spending. It also estimated that companies can shave as much as 25
percent from those costs by leveraging new technologies, examining new options
and using "new methods for influencing travelers.