Egencia Predicts Average European Ticket Price Rise Without Airline Capacity Growth
European average ticket prices and average hotel daily rates decreased significantly year-over-year in the first quarter, as demand declined sharply—led by a fall in premium-class travel— oil prices remained relatively stable and low-cost carrier competition increased. However, average ticket prices could rise as the 7 percent yearly growth in European airline capacity has ceased, according to an Egencia forecast and benchmarking report released yesterday.
"The capacity environment as well as consolidation and alliances are contributing to upward pressure on pricing and certainly other costs including fuel, aircraft and union pressures," newly appointed Egencia president Rob Greyber told EuroBTN. "Right now, the demand environment is dominating, uncertainty is dominating, as is increased competition from low-cost carriers in Europe."
Greyber also noted that the stronger U.S. dollar on a relative basis is increasing prices for European travel to U.S. destinations.
Of the top 20 European destinations of business trips originating in Europe, prices for the United Kingdom and Moscow saw the biggest decreases in the first quarter of 2009 compared with the same period in 2008. The economic downturn's heavy blow on Moscow generated average ticket price and average daily hotel rate falls of 20 percent and 23 percent, respectively.
London ATP and ADR decreased 21 percent and 18 percent year-over-year, respectively. Glasgow ATP decreased 25 percent and its ADR fell 19 percent. Manchester ATP decreased 20 percent and its ADR declined 23 percent.
The United Kingdom, which in recent years has had some of the strongest business travel pricing, has tailed off at a higher pace because of its large financial services orientation, according to Greyber.
"The financial services sector in the last six months has fallen off dramatically," Greyber told EuroBTN. "What volume there is in financial services and elsewhere is shifting from the front of the cabin to the mid- or back of the cabin. There is a lot of premium cabin seats in the London market both to Europe and transatlantic."
Meanwhile, French business travel destination prices have held up relatively better than their European brethren. Paris ATP decreased 7 percent and ADR dropped 3 percent. ATPs for Marseille flights were flat from the previous year and ADRs decreased moderately at 3 percent. Lyon ATP actually increased 1 percent and ADR enjoyed a 10 percent rise compared with the first quarter of last year.
ATPs are based on International Air Transport Association bank settlement plan data for all classes of travel. ADRs are generated by Expedia internal statistics. Pricing is adjusted for year-over-year changes to the foreign exchange rate.