Second-quarter airfares around the world are soaring due to the sharp increase in jet fuel prices after the outbreak of armed conflict in the Middle East, according to a new report from travel consultancy Advito.
Using predictive analytics, Advito projects second-quarter international business-class airfares to increase at least 7 percent year over year in every region, with double-digit percentage increases in itineraries originating in North America and Europe, among other locations. Similar trends exist in most regions for international economy and domestic business-class and economy fares, according to the consultancy.
The culprit, according to Advito, is fuel surcharges, the mechanism by which many carriers choose to offset fuel prices. Such surcharges can total more than 40 percent of the cost of an itinerary, Advito said.
"Unlike negotiated discounts, these charges are generally non-negotiable, meaning they flow directly through to total trip cost, "according to Advito, which is the consulting arm of travel management company BCD Travel. "In most major markets, fuel surcharges are not regulated, allowing airlines broad discretion over when and how they are applied, provided prices are transparently disclosed at booking."
Advito said it uses predictive analytics to produce airfare calculations based on fare availability for the second quarter in global distribution systems, using April searches.
Meanwhile, Advito projects second-quarter average daily hotel rates to increase year over year, including forecast hikes of 3.8 percent in Europe and 3.1 percent in Asia. The United States is a notable exception: Advito projects average Q2 rates there to decrease 2.2 percent, part of a 2 percent decrease in North America. The consultancy suggested U.S. results were market and even event-specific, with pockets of rate firmness surrounded by "otherwise muted growth."
Advito said its hotel projections were based on predictive analytics around flexible best available rates available in GDSs and online travel agencies.
Advito projects second-quarter U.S. car rental rates in the United States to increase 1 percent year over year, "largely driven by sustained demand for" sport utility vehicles.