Advito is tracking "sharper and faster" than expected recovery in corporate travel demand and airfares in North America and Asia-Pacific but sluggish trends in Europe. "Travel buyers everywhere can expect to pay more for their air travel by the end of this year than was the case in 2009," according to the BCD Travel consultancy in its second-quarter update to its 2010 forecast, originally published in October 2009. Worldwide fare increases, Advito said, will be sustained all year long if airlines maintain capacity discipline, "as has been the case for the last 18 months," and if economic growth in North America and Asia-Pacific "continues to outweigh concerns about national currency and debt problems in some European Union member states. If those problems escalate into a Europe-wide crisis, worldwide business travel could take a second dip globally."
On the hotel side, citing an abundance of new supply in some markets, Advito adjusted downward pricing expectations in about 20 countries. "Although demand is increasing, corporate transient prices remain depressed because hotel occupancy has been negatively impacted by a significant drop in meetings demand," the company added.
Regionally, "perhaps the most dramatic market of all is Asia-Pacific," according to Advito. "A fast exit from the recession in some Asian countries and resumed ultra-high growth in China has changed the situation very quickly." Advito in October predicted airfares in 2010 would rise as much as 4 percent throughout the region. In March, as part of the first update to its original 2010 forecast, Advito adjusted that projection upward to as much as 6 percent. Now, the company predicts a 9 percent to 10 percent increase.
In lodging, however, Advito predicted a 3.8 percent year-over-year drop in average daily rates in Asia-Pacific, a steeper decline than the projected decreases in both the October (1.5 percent) and March (2.8 percent) reports. A larger-than-expected ADR drop also now is expected in China specifically (down 4.5 percent), where economic growth "will continue to be offset by significant new capacity coming online," Advito wrote. A regional exception is Singapore, where there has not been significant new capacity added to the market; Advito still expects a lower ADR there in 2010 (down 2.8 percent from last year), but not any lower than its earlier forecast.
In North America, April produced an average airfare increase of 15 percent, according to Advito, due to "a faster-than-anticipated spike in demand" and more travelers purchasing premium-class seats. For the full year, Advito now expects North America intercontinental fares paid by clients to increase 8 percent for business class and 6 percent for economy. Regional airfare predictions are a 1 percent increase for business class and 9 percent for economy; Advito's original forecast called for increases between 3 percent and 6 percent.
The North America lodging forecast, too, underwent revisions. Advito's predicted ADR change for 2010 is a 1.6 percent reduction, wider than the 0.4 percent cut envisioned in October.
European Concerns 'Suppressing' Travel Pricing
In Europe, "ongoing concerns about the European economic situation and governmental austerity measures are suppressing demand and fare evolution in both the air and hotel categories," Advito wrote. Unlike predictions for Asia and North America, Advito's specific European regional airfares are lower than both 2009 levels and its original forecast: a 2 percent reduction for business class and a 1 percent drop in economy class. Intercontinental airfare predictions were unchanged at 3.5 percent and 2.5 percent increases, respectively, for business and economy class tickets.
In terms of average hotel rates, Advito adjusted downward for a second time projections for Spain (now expected to be down 5 percent year over year), Germany (down 3.3 percent), the United Kingdom (down 2.2 percent) and France (down 2.1 percent). It also revised downward--generally to between 2 percent and 3 percent--expected ADRs in Belgium, the Czech Republic, Denmark, Finland, Ireland, Italy, the Netherlands, Norway, Russia, Sweden, Switzerland and Turkey. Most year-over-year declines are pegged between 2 percent and 5 percent.
Latin America Slower To Recover
Advito also adjusted downward Latin America ADR predictions, to a 4.5 percent regional increase from the 7.5 percent increase in the October report. Discussing Argentina, Brazil and Mexico specifically, Advito wrote that the expected economic and business travel recovery "has been slow to manifest itself. Additionally, security concerns in Mexico have had a negative impact on the meetings sector, which has traditionally been a strong driver for ADR development in this market."
On the air side, Advito left unchanged most specific Latin America forecasts except for regional business-class fares, now expected to rise 5 percent rather than the 3 percent predicted in the October report.
In the Middle East, where "continuing excess in capacity will offset growing demand," the consultancy expects regional economy-class airfares to drop 1 percent year over year (compared with an original forecast of a 2 percent increase), while intercontinental business-class fares rise 2.5 percent (down from an originally anticipated 3.5 percent increase). In Africa, Advito expects economy-class fares to be about flat (versus earlier predictions of 1.5 percent increase for intercontinental flights and a 2 percent rise for regional flights).