Average Air, Lodging Prices Rise 6 Percent In North America, Says Egencia

First-quarter ticket prices for air travel within North America rose by an average of 6 percent year over year, while intra-Europe ATPs increased 5.8 percent, according to an analysis of ARC, OAG and internal Expedia data by Egencia for an annual global benchmarking report.

"Clearly airlines are doing a better job of capacity control," said Chris Vukelich, Egencia Americas vice president of supplier relations. First-quarter average ticket prices rose the most at 12.5 percent to $452 in Minneapolis, followed by 11.4 percent in Atlanta to $364. There, the jump is likely due to the "disappearance of a low-cost carrier (AirTran) in the market. If you look at Minneapolis, there's also further consolidation going on there. Those were the only double-digit" increases in North America, he added.

While oil prices recently have dropped, Vukelich noted that higher fuel prices earlier this year and a limited increase in supply prompted the airfare hikes. "We started to see a little flattening of the average ticket price increases," in the second quarter. "Oil is the key behind all of this. When oil spikes up, airfares go up."

Denver travelers enjoyed the lowest average ticket price in North America at $328, still 4.2 percent higher than a year ago. Montreal's average fares were the highest in North America at $695, up 7.1 percent. Air travelers who departed from San Francisco in the quarter saw their average ticket price decline by 0.8 percent to $376, according to the analysis.

Prices for travel from North America to "European and Asia-Pac destinations saw sharp decreases in ATPs, including Paris (down 19 percent to $629), Hong Kong (down 14 percent to $910) and London (down 13 percent to $588)," according to the report.

Rising Prices In Europe  

Average prices for intra-Europe travel rose 5.8 percent as compared to a year ago, when ATPs decreased 8 percent from 2010.

Costs rose the most (15.2 percent) for those traveling from Amsterdam, where the ATP was €238, followed by Barcelona, where the average grew 13.5 percent to €194. While the average cost declined 0.1 percent in Moscow, the average ticket price was the highest for intra-Europe travel at €423.

"Stockholm and Paris saw larger decreases in air ticket prices, down 12.4 percent and 9.7 percent, respectively," according to Egencia. "Paris may be down due to higher competition, especially from rail. Travelers might be using train services more often since the connection to Paris is very well developed, cheaper and less stressful for travelers." From Europe, fares to Los Angeles declined 16 percent while those to Chicago dropped 11 percent. Fares to New York and San Francisco each dropped 4 percent.

A Mixed Bag In Asia/Pacific 

In the Asia/Pacific region, the average ticket price was up 3 percent as compared with a year ago, but prices fluctuated by market. For example, travel from Bangkok was up 17 percent and from Beijing up 12.5 percent, while travel from Tokyo was down 11 percent and from Taipei down 6.1 percent.

"Low-cost carriers are continuing their expansive presence on domestic and international routes while incumbent major carriers face losing market share. For some intra-APAC, mid-haul routes, a decrease in business class uptake is also contributing to decreases in ATPs," the report stated.

Hotel ADR Up 6 Percent In N. America, Less Elsewhere  

Hotel costs in the first quarter rose an average of 6 percent in North America, compared to a year ago, with the largest increases in San Francisco, up nearly 14 percent to $154, and Boston, up 6.4 percent to an average of $158. Dallas' ADR declined 7 percent to $97. Egencia analyzed STR and its own leisure and corporate business rates combined for the hotel rates and percentage increases. 

"We have seen clients tighten their belts this year and shift more of their negotiated hotel volume into three stars and below," according to Egencia North America hotels director Steve Peterman. Some travelers have opted for airport hotels to avoid the higher downtown hotel rates in Manhattan, Chicago, San Francisco and Los Angeles, he said.

The average daily rate rose 3.3 percent in Europe and 5.7 percent in Asia/Pacific. In Europe, the biggest increases were noted in Stockholm, where the average rose 9.2 percent to €123, followed by Dublin's 6.5 percent increase to €81. "Given all of the economic uncertainty over the past year, the hotel segment in Europe seems healthy, although of all three 'super regions,' it appeared to have the weakest growth," according to Egencia.

Average hotel rates in Jakarta rose nearly 24 percent to $122, still among one of the lowest ADRs in the region; 15.4 percent in Seoul to $162; and 12.4 percent in Hong Kong to $214. Despite rising domestic demand and no new supply, rates in Australia remained flat and prices in India are down.

In line with other recent reports, Egencia said car rental rates fell 2.4 percent year over year in the quarter "due primarily to a highly competitive marketplace and abundance of supply."

Given the price increases, Egencia's Vukelich said, he wasn't too surprised to see that 77 percent of 300 buyers surveyed in April cited "cost control/reducing expenses" as the greatest challenge for their travel program. In that survey, 62 percent of global buyers said they planned to "negotiate more in 2012," up sharply from the 38 percent who so responded a year ago.

For those interested in airline discounts, Vukelich advised, "You're going to have to deliver incrementally. If you talk to most travel negotiators, it's more performance-driven. That also ties together with your ability to create a policy and enforce it."

For the remainder of 2012, 43 percent of buyers surveyed said they expected trip volumes to increase and 46 percent expected travel spend to increase.