CWT: Modest Business Travel Price Increases Expected For 2013

First out of the gate with a 2013 corporate travel pricing forecast, Carlson Wagonlit Travel expects modest global growth next year "in most areas of travel spend." Specific country forecasts vary widely, but on a regional basis, the United States and Canada would see the largest hike in average airfares (2.8 percent), Latin America would lead in hotel rate and per-attendee meeting cost increases (6.5 percent and 11 percent, respectively), and Asia/Pacific would see the biggest jump in car rental rates (5.9 percent).

"Slightly higher prices will be the reality again next year as demand for travel outpaces supply in most places," according to Nick Vournakis, CWT Solutions Group's senior vice president of global product marketing. "Price increases in 2013 will begin to level off in most regions throughout the world compared to what travel buyers experienced in 2012, as booming economies like Asia/Pacific's begin to normalize, and as uncertainty remains in Europe."

In the United States and Canada, CWT's forecast assumes airlines "will continue to stay disciplined about controlling capacity to ensure demand outpaces supply, enabling them to raise prices." Average daily hotel rates are expected to increase slightly more, by about 3.2 percent, "with the top business destinations able to command much higher prices. Western Canada will experience particularly high increases based on an influx of foreign demand for the area's energy and mining resources."

Though the travel management company is "not seeing our customers pull back on travel, they want to travel but they want to stretch the dollar," said Joel Wartgow, senior director of CWT Solutions Group for Americas. "There is some reluctance from the travel buyer, some hesitation now because of what is happening globally that is causing our customers to be a little more cautious in how they buy. That caution should be more prevalent in the first half of the year in North America, so we are not expecting as strong of a pricing increase in the first half of 2013. As consumer confidence builds and, as we think, some of this economic volatility becomes less volatile in the second half of 2013, we think demand will pick up a little more significantly and suppliers as a result will have a better opportunity to increase their prices."

The "highly competitive" car rental firms in the two countries, however, again "will struggle to raise prices," according to CWT, which predicted an overall 1.1 percent drop in car rental rates.

In the Europe, Middle East and Africa region, CWT's projected price increases across all categories are quite modest amid a dichotomy of troubled European economies and those in the Middle East and Africa that "are faring reasonably well." Because carriers in the region "have been diligent in implementing tight capacity controls that continue to yield high load factors despite economic concerns," CWT forecast a 2.5 percent rise in airfares. Average daily hotel rates are expected to edge upward 1.3 percent. The TMC noted that a "post-Olympic" demand slowdown will result in lower rates in London, while in France, middle-tier hotel brands are investing in upgrades that will attract more corporate travelers. EMEA car rental rates will rise about 1.2 percent next year, following market consolidation and "aggressive" growth among "low-cost providers," according to CWT. The region's high-speed rail rates, meanwhile, "will likely increase 4.3 percent during 2013," and as much as 9 percent for premium cabins, "where corporate travelers typically ride to access free wireless Internet and other amenities."

In Asia/Pacific, CWT's forecast includes a 2.5 percent increase in airfares "due to the number of low-cost carriers entering the market and holding pricing down." The region's hotel rates on average would increase 3.5 percent, and as much as 8 percent in Singapore "amid strong travel demand and lagging supply." The nearly 6 percent projected jump in car rental rates factors in Australia and New Zealand, where pricing "will perform quite strongly due to increased demand and more tightly managed fleets."

For Latin America, CWT laid out two air pricing scenarios: "Countries with healthy economies like Brazil and Chile will experience solid price inflation, while countries with weaker economies like Argentina, Colombia, Mexico and Peru expect moderate decreases to only slight growth." Across the region, the forecast pegged the average overall increase at 1.3 percent, with the per-country forecasts ranging from reductions of as much as 3 percent in Peru to increases as much as 6 percent in Chile.

Latin American hotel rates in aggregate are expected to increase 6.3 percent, led by Brazil, which "is the only nation in CWT's entire 48-country forecast expected to see double-digit price increases next year. This is due to strong demand and limited supply," according to the forecast. "However, that will soon change, as inventory is rapidly being added in Brazil to accommodate the 2014 FIFA World Cup and the 2016 Summer Olympics. Even underperforming economies will experience noteworthy price inflation given continued international demand amid stagnant construction pipelines."

North America 2013 Meetings Bookings 'Already Strong' 

In general, CWT expects per-attendee meeting costs worldwide to rise more noticeably than prices in other travel categories. In North America, a 4.8 percent increase would coincide with an expected 6 percent jump in group size. "Booking windows have increased 5 percent as organizations feel more confident about the future," according to the forecast. "Given this, advance bookings for 2013 are already strong."

CWT projected that meeting costs would rise most in Latin America, where per-attendee spending would rise 11 percent and group size on average would decrease nearly 7 percent. Similarly, in Asia/Pacific, per-attendee spending is forecast to increase 6 percent while group size would drop about 4 percent. In both regions, organizations will "attempt to mitigate rising supplier prices by holding a larger number of smaller meetings with fewer attendees and shorter durations."

EMEA's 2013 meetings environment should be different as the expected average per-attendee meeting cost inches up about 1 percent. "As a result, there will be less pressure on EMEA-based organizations to reduce group sizes to offset higher prices," according to CWT.

Hitting The Window 

Including an analysis of global client data, CWT's forecast is based on "a statistical model that evaluates historical price behavior and forecasts future price references; the market-specific expertise and travel industry knowledge of CWT personnel worldwide; and macro-economic information sourced from IHS Global Insight, the International Monetary Fund Research Department, and the United Nations."

When asked why CWT issued its 2013 forecast more than five months before the end of the current year, Wartgow alluded to advantages for buyers who get an early start on hotel rate negotiations and a general request from clients. "The feedback we got from customers is that they want this information to prepare their budgets for the upcoming year," he said. "Right now they are thinking about what they expect to spend on T&E in 2013 and looking to us for pricing forecasts. Last year, we missed that window." He acknowledged the risks of formulating expectations over a longer timeline, but said they are "outweighed" by the benefits.