BCD Travel's Advito consultancy issued a preliminary forecast for 2011 corporate travel costs, predicting airfare increases around the globe of generally 4 percent to 5 percent versus 2010 and hotel rate hikes of generally 3 percent to 6 percent. For the rest of this year, a "spike" in corporate travel demand will further push up airfares (already "rising sharper and faster than originally predicted") across Asia, Europe, the Middle East and North America, according to Advito.
Advito noted that strong demand for intercontinental air travel--up this year as much as 25 percent on transatlantic routes and as much as 30 percent on transpacific routes, it reported--has fueled fare hikes. For 2011, "the key question is whether the fare increases airlines are currently imposing worldwide are likely to be sustained," the consultancy wrote. "Advito predicts that the answer is yes," assuming carriers maintain capacity disciplineand economic growth in Asia and North America offsets European currency and national debt concerns. As such, Advito for next year predicted "moderate airfare increases across all regions."
In North America, Advito said average fares would rise between 2 percent and 7 percent, with intercontinental fares at the higher end of that range. These 2011 predictions are similar to Carlson Wagonlit Travel's, issued last month. The notable difference is for domestic premium fares: Advito predicted they would increase 2 percent to 3 percent, "tied to strong demand and a concomitant lack of availability in the back of the plane," while CWT forecast fares in that category to decline next year by as much as 7 percent.
Advito also expects average European airfares to increase 2 percent to 7 percent, with regional business class prices at the low end of range and regional economy fares at the high end. "The heaviest growth will occur in the first quarter and then taper off as the year progresses," according to the report.
In Asia, Advito sees "demand growth flattening" with 2011 airfare increases predicted around 4 percent to 5 percent across all categories. It issued similar predictions for other regions, with capacity growth leading to minimal fare increases in Latin America and flatter demand leading to "moderate" increases in the Middle East.
Advito suggested that yield management is the key factor, "as travelers are pushed into more expensive, less restrictive booking classes. It may well be the case that $200 airfares between Chicago and Atlanta are still available, but they are infinitely harder to obtain as bottom inventories get squeezed." It also noted that Saturday night stay and advance purchase requirements are "coming back into play. Influencing buying behavior should be a key priority for travel managers seeking to manage their travel budgets."
Given the proliferation of fees charged by airlines, the consultancy also wrote that "many corporate travel managers have expressed interest in--and Advito supports--pre-purchasing ancillary airline services to better control their travel budgets or to negotiate some or all of those fees away completely."
'Modest' Hotel Price Hikes Despite Demand 'Surge'
Though Advito during the second quarter tracked a "surge" in hotel demand, it maintained full-year 2010 average daily rate predictionsin all markets covered by its forecast, apart from upward revisions in China, where a "high-powered economic recovery and associated robust demand have not been offset by new capacity, as previously expected"; Singapore, owing to "strong demand, a lack of significant new capacity and a robust globally oriented economy"; and the United Kingdom.
For 2011, Advito predicted "modest" ADR increase in all regions, partly due to "continuing, though slowing, macroeconomic growth" and a rebounding meetings sector. Price increases would be tempered by new properties opening in many markets, particularly in Asia-Pacific (and especially Shanghai, Bangkok and New Delhi) and the Middle East (notably Dubai).
For North America, Advito predicted a 3.5 percent increase in 2011 ADR. By comparison, CWT last month forecast increases of roughly 7 percent in the United States and 5 percent in Canada.
Overall, Advito wrote that price increases would be more pronounced in emerging markets than established ones, and higher in major cities than secondary or tertiary markets. For example, it projected that ADRs in New York City would jump 13 percent.
"While consolidating hotel programs has been the trend over the past few years, Advito is advising buyers to add properties to their solicitation list," according to the forecast. "Buyers might be able to mitigate the rate-increase trend by talking with new hotels that have opened in those markets, many of which will be eager for business."
Car Rental And Rail
Advito did not issue preliminary price forecasts for car rental but noted that pricing in 2010 "has remained relatively stable, due to aggressive competition," despite rising corporate volumes. The consultancy also suggested that buyers "will see little pricing impact regardless of the outcome" of the pursuit by both Hertz and Avis Budget to acquire Dollar Thrifty--a predominantly leisure-focused supplier.
On the rails, Advito noted new construction and/or expansion projects for high-speed lines during the next few years in Brazil, Saudi Arabia, United Arab Emirates, the United States and throughout Europe. "As more high-speed rail networks expand in markets across the globe, airlines may find themselves having to adjust pricing and services in consequence," Advito wrote. "Increasing rail-air competition is good news for buyers, who will find themselves with both more options for their travelers and a stronger position at the negotiating table with airlines."
Advito based preliminary 2011 predictions on aggregated worldwide BCD Travel client data, and information from the International Air Transport Association, International Monetary Fund, Economist Intelligence Unit, Lodging Econometrics, OAG, Organization for Economic Co-operation and Development, and Smith Travel Research.