Advito's Olivier Benoit discusses:
- Overall corporate travel demand trends
- The effect of market volatility on RFPs
- Important figures outside of travel that reflect demand
Business travel consultancy Advito each quarter releases a predictive analysis of airline, hotel and car rental costs for the upcoming quarter. Advito, the consulting arm of travel management company BCD Travel, uses booking data and trends to develop the quarterly forecast. Advito SVP and principal Olivier Benoit on Tuesday spoke with BTN managing editor Chris Davis about the key factors Advito considers in developing its forecasts and the challenges the current market poses in developing an assessment. Edited excerpts follow.
BTN: It's been a very volatile market in the past few months, especially here in the United States. What's your overall sense about how the volatility is affecting corporate travel demand?
Olivier Benoit: There is actually a gap between what we could have been concerned about when all the geopolitical and trade news broke in early April. Like anyone else, we were like, "OK, we need to digest and understand what happening here." Now we are looking at bookings, we are looking at price trends, we are looking at client demand from the consultancy side of the house. My very high-level feedback is that there is no drama.
I'm very cautious, like anyone in the industry, because volatility is super high, and news can break every morning. That can be good news, bad news, anything could happen, so I must be very cautious here. But to date we believe that compared to what we would've expected for 2025, there might be a slower growth rate.
This is very much aligned with what I see in the press and from when we discuss with suppliers and clients. The high-level feeling that we have—it may turn out to be wrong and we end up with a strong 2025, as we expected when we started the year, or it could be something really poor in terms of growth or no growth rate at all—but as we speak that's how I see it, a lower growth than expected. That's what we anticipate for the coming months.
BTN: Has that trajectory changed within the year? Have April and May proven different than the months before?
Benoit: I've been trying to play around with what we have before we run our forecasting models, and I don't see any tipping points. The latest data we have is from the end of Q1. I can see the actual against what was in our Q1 forecast, and we were pretty close. [In Q2,] there are a couple of pockets of variation, and you won't be surprised, like cross-border between the U.S. and Canada and the U.S. and Mexico. But that's very specific. I don't see an overall trend in our client data that is showing me a tipping point or a trend that is breaking [like] typically what we have when there is a major crisis. We don't observe that at all.
BTN: How does the volatility affect your ability to forecast?
Benoit: We are using two different methodologies to forecast: one for air and hotel, another one for car and rail. Car and rail volatility will have an impact on our ability to forecast because we are using the traditional way of forecasting, which is that we look at historical data, we build a couple of assumptions around future demand, future GDP, all kinds of economic KPIs that you typically use to build the forecast. We run a statistical model, and we end up with a forecasted number. And so there we are at risk because our assumptions could turn out to be completely wrong. So for car and rail, I'm very cautious.
For hotel and air, it's a different story because here we have a completely different way of forecasting. We are observing future price points, so it's not a forecast. We are reading the price points in the future by shopping in global distribution systems or in where we can find the [best available rates] for hotel. We don't build assumptions, we are not at risk of being wrong with our assumptions because we are shopping price points for the next three months, six months, nine months, even one year in advance using GDS and New Distribution Capability fares for air and using BAR for hotel. It means that what we observe is real.
BTN: We've seen airlines, especially here in the U.S., report some Q1 softness in U.S. domestic demand with premium class holding up a little bit better, with perhaps some slowing down with North America-related international. Is that reflective of what you have seen?
Benoit: From a consultancy perspective, it's interesting to check what our travel managers and travel clients are saying on this, how they are reacting and what they are asking us to look at. And there have not been significant alerts. … We have a lot of [requests for proposals] running. Hotel season is starting soon. On the air side, we have more RFP requests and projects than last year, and our clients are still willing to process it. They have not asked us to change our negotiation strategy and tactics midway.
When we look at future airline programs, we have not observed any specific dramatic change in trends except like the offering between U.S.-Canada and U.S.-Mexico. You see there is a gap between the atmosphere, which is a little bit concerning with volatility, and what's happening in our real-life day-to-day and the way we are addressing airline and hotel program optimization. It's not completely business as usual, but I have not seen anything specific here.
BTN: Does that also hold true in terms of international inbound to the U.S.? There's obviously been a lot of talk about reluctance among some international travelers to come here. Is that translating into anything with regards your own clients about business travel here?
Benoit: No. Again, we did not get any requests in this dynamic management of our program outsourcing to change our estimated volume. When we source, we provide suppliers: "OK, that's what we expect for next year." And we have not had any request to change that. "Oh, now I expect to do 50 percent less between Europe and the U.S., so you need to take that into account in your negotiation." Typically I'm trying to find some signals, and we did not have this type of request.
What I do see is some clients are reducing demand to manage decarbonization. That's still there. If there is a request to potentially anticipate lower volumes, it's mainly driven by their sustainability targets, not by what's happening in the economic environment today as we speak.
BTN: Is that mostly a European or at least a multinational concern versus a North American concern?
Benoit: We were also wondering what is going to happen with traveler well-being, DEI programs accessibility and of course sustainability. Are we going to see a drop in demand? The answer is no, not at all. And our clients I'm talking about are Europe-based and U.S.-based. These are large U.S. companies, and they are still full speed on their decarbonization path. Most of them started a couple of years ago, they have a goal, they have a path, and they ask us to support their decarbonization to eventually meet the end goal, which most of the time is 2030 or 2050.
BTN: You mentioned your Q1 forecast was pretty close to being on target. Where were the variances? Were there any differences in the Q1 market conditions looking back versus the forecast?
Benoit: I looked at North America, Europe and APAC, because that's the biggest share of business travel in our world. We were extremely spot on for North America and Europe trends. Let me give you an example. We said in Q1 that we expected a 4 percent [year over year] business-class intercontinental fare increase. … I see 5.4 percent in the actual, so it's close. For economy, we had minus-1 percent in the forecast, we have minus-3 in the actual. So it's pretty good. Europe, same, it was very consistent.
The only one where we are, we were off is APAC. So we forecasted for intercontinental business class from APAC at plus 3 percent, and we are good with 2 percent [actual], but for economy we forecasted plus 4 percent, and we are down around 4 percent. So there we are not directionally correct.
BTN: Do you know the particular factors in APAC for why that happened?
Benoit: Our APAC forecast and actions are very volatile for a good reason: It's because the offering is extremely volatile. The post-Covid ramp up [there] has been late and has been crazy in terms of ramping up the seats offered by airlines. So because you've got such a high volatility for the major players in APAC, it makes our forecast a little bit more challenging than Europe or North America, where things are moving at a slower pace. So I was not completely surprised by that.
BTN: Broadly speaking, are there other external figures or KPIs that we should be looking at to gauge corporate demand going forward? Are there any figures that could align or be commensurate with demand signals?
Benoit: We are always looking at cargo rate trends. Especially for air, we can see the air cargo trend being an advance indicator of passenger demand, and there is not a one-to-one correlation, but we are looking at that.
It's interesting to look at what's happening in the shipping business and in the air freight business because they are extremely reactive to any change. If you announce a new 100 percent tariff between two countries for June 1, the air business will change overnight. For shipping, it's different, it takes more time. But we are looking into that.
We are also monitoring jet fuel costs, and interestingly enough [the price] has dropped, but we don't see it [reflected] in the fuel surcharges from airlines. We are definitely digging into that. … The question is, why would the jet fuel price drop without having any influence on the airline fares? And the answer from airlines is because it takes time, and that's fair enough. But what we have seen in the past, it takes a lot of time to cut the fuel surcharge, but then it takes 24 hours to bring it up. So we are challenging airlines on this. We are definitely looking into that because, as you know, the fuel surcharge is a massive share of the total cost paid by clients.