Though there are signs of moderation, economic activity and
therefore corporate travel volumes and prices in Latin America, especially in
Brazil, remain on the upswing. Strong business travel demand is continuing in
2012 and travel prices—notably hotel rates—are expected to maintain rather
steep upward trajectories.
Looking back at 2011, the latest BTN Corporate Travel Index data corroborate industry observations
regarding double-digit percentage price hikes borne by business travelers in
several major Latin American business centers. Buenos Aires, Caracas, Lima, and
San Juan experienced particularly large year-over-year jumps in hotel,
miscellaneous and food costs.
[Please click here to view the digital edition of the 2012 Corporate Travel Index, featuring all per
diem listings, downloadable as a pdf.]
Persisting into 2012, strong domestic and inbound
international demand favors travel suppliers and pressures their corporate customers
to minimize spending growth. According to Pegasus Solutions, Latin America in
January was the only global region to see a year-over-year increase in bookings
through global distribution systems. Carlson Wagonlit Travel president and CEO
Doug Anderson told BTN that he
expects 2012 Latin American travel transactions among clients to grow in the "mid-to-high
teens," a similar pace as in Asia/Pacific but noticeably ahead of North
America and Europe. In 2011, CWT's transaction volume in the region jumped 12.7
percent.
Brazil, of course, is the region's economic focal point,
accounting for 63 percent of Latin America's total business travel spending,
according to a summer 2011 Global Business Travel Association Foundation study.
GBTA projected Brazil's business travel spending compound annual growth rate
through 2015 at about 7 percent, powered by strength in the social/personal
services, transportation services, rubber/plastic manufacturing, construction,
petroleum, paper products and real estate sectors. That outpaces most
projections for North American and European countries, and while it's still
well below the 20-plus percent growth experienced in 2009 and 2010, Brazil's
demand levels mean more price hikes.
In January, the average daily hotel rate in São Paulo jumped
15.5 percent and in Rio de Janeiro climbed 13.7 percent, according to STR
Global. Those were much larger increases than the 3.7 percent the firm measured
for the entire Americas region and the 2.8 percent global average.
Corporate travel buyers have been bracing for even higher
Brazilian prices this year. For 2012 negotiated hotel rates, "we
originally were looking at Brazil to come in with 4 percent to 6 percent
increases," said Advito vice president Bob Brindley. "It really came
in closer to 16 percent to 20 percent, with São Paulo at about 25 percent."
In an updated 2012 forecast issued in February, Advito revised upward its Latin
American ADR 2012 forecast to 8 percent to 10 percent of overall growth.
In a fourth-quarter 2011 update, CWT reported that "proposed
increases [for negotiated hotel rates in Latin America] are beginning in the
low single digits and reaching up to 30 percent to 40 percent in Brazil, where
demand continues to outpace supply even as construction ramps up in preparation
for the 2014 World Cup and the 2016 Summer Olympic Games. Brazil is also the
primary market where CWT has observed hotels declining to bid for corporate
business, as local hotels are filling rooms at premium rates without having to
discount." To mitigate the challenge, CWT encouraged clients "to
position themselves with Brazilian hoteliers as a source for long-term
business, which will be needed once the special events are over and there are
many more rooms to fill. This may prompt hoteliers to continue providing
corporate discounts right now, despite being able to charge other travelers
higher rates."
Starwood Hotels & Resorts Worldwide CFO Vasant Prabhu in
February told analysts that the company's "baseline scenario assumes
another year of robust growth in Latin America."
Airlines, too, are seeing ongoing strength in Latin America.
According to the International Air Transport Association, the region's total
traffic in January increased nearly 8 percent year over year, ahead of the 5.5
percent global average.
"Economic growth has slowed from last year but remains
stronger than most parts of the world," according to IATA, which
specifically cited Brazil's "strong domestic" air travel market.
Given solid corporate air demand in the region, Advito upped
its 2012 airfare predictions a few percentage points to increases of 7 percent
for intercontinental travel and 8 percent for regional travel.
Though Latin America as a whole is producing higher travel
prices amid growing business travel demand, the trend is not uniform across all
the region's markets. For example, while not one South American city included
in the Corporate Travel Index had lower 2011 total costs than they did in 2010,
San José and San Salvador in Central America experienced reductions of about 20
percent. Further north, Mexico City's total 2011 business travel costs dropped
6 percent. The same generally was true specifically for hotel and miscellaneous
costs: all South American markets covered in the index—except Quito—had
increases of at least 9 percent, and some much higher than that, while markets
in Central America showed much smaller growth, and, again in the cases of San
José and San Salvador, huge reductions.
Slow Growth North Of The Border
In Canada, cities listed in the Corporate Travel Index for
2011 had low-to-mid single-digit percentage growth in total costs versus 2010
levels, led by Ottawa and Vancouver, each up nearly 6 percent. Montreal showed
a 1.1 percent decline. In terms of hotel and miscellaneous expenses, major
Canadian cities showed year-over-year cost increases between 2 percent and 6
percent, again excluding Montreal, where the figure was down 2 percent.
Looking ahead, the GBTA Foundation report projected "steady"
business travel growth during the next five years, with "solid"
growth in government and real estate.
Nearly three-quarters of 54 Canadian public and private
organizations with annual travel budgets of at least C$1 million recently
polled by The Conference Board of Canada and the Association of Corporate
Travel Executives foresaw higher domestic Canadian hotel rates, increasing this
year on average by 2.1 percent. Nearly nine in 10 respondents anticipated
overall higher airfares this year. Specifically, they expected domestic
Canadian airfares to rise on average by about 3.1 percent, transborder fares to
increase 3.2 percent and international fares to grow 3.7 percent. About a
quarter of all respondents also indicated that they expected corporate car
rental rates to move slightly higher, with an average increase of 0.2 percent.
In terms of total business travel spending, 60 percent of
respondents expect a year-over-year increase in 2012 compared with 9 percent
who anticipated cutbacks. The average total spending increase is predicted to
be about 1.4 percent—below recent GDP projections for Canada—and mostly
attributable to higher travel prices. About half of respondents also expected
greater corporate travel trip volumes, with an average increase of about 2.5
percent. None expected growth above 15 percent and 11 percent said they are
expecting fewer trips in 2012 versus 2011.
"The growth in the number of trips is expected to
outpace growth in travel spending," according to ACTE and The Conference
Board of Canada. "This may suggest that travel executives are implementing
cost containment measures or that the average spending per trip is expected to
decline, or a combination of the two."
This report
originally appeared in the March 19, 2012, edition of Business Travel News.