Based on revised gross domestic product forecasts and varying degrees of air travel growth, BCD Travel consultancy Advito refined some of its 2014 regional airfare and hotel rate predictions. "According to the International Air Transport Association, world air travel demand grew by 5.2 percent in 2013, with strong year-over-year growth of 6.8 percent in December," Advito wrote in its report on revised corporate travel price projections, issued this week. "We've seen more of the same in the early months of 2014, with robust growth set to continue, or even strengthen as we progress through the year."
Advito cited a small decline in Oxford Economics' estimated 2014 global GDP growth, to 2.8 percent from the 2.9 percent used when Advito in September 2013 initially conveyed its 2014 projections. By region, Oxford lowered GDP growth forecasts for North America, Asia, Latin America, the Middle East and Africa, and raised them for Europe and the Southwest Pacific region. "While growth in emerging markets will remain dynamic, some key countries, such as Brazil and Russia, will suffer a marked slowdown in growth," Advito added.
Regional Forecast Revisions
In North America, "demand and capacity growth remain weak, so we are largely maintaining our forecasts," Advito wrote. "Airfares in North America are holding steady." The only average airfare projection changed for the region was intercontinental economy airfares, for which Advito now expects a 1 percent year-over-year increase versus its initial prediction of no change.
For North American hotel rates, Advito now expects an average increase as high as 5 percent this year, compared to the earlier forecast of growth up to 4 percent. "Stronger market conditions have continued to provide upward momentum to hotel rates in Mexico," Advito noted.
Asia/Pacific projections were changed the most of any region. In terms of hotel pricing there, "increasing hotel capacity has coincided with a softer economic outlook," according to the consultancy. "This is most noticeable in India, where Advito once again predicts a fall in hotel rates." For the region overall, the average daily rate now is expected to increase 1 percent to 3 percent year over year, up from the initial 0 percent to 2 percent range.
For Asia/Pacific airfares, Advito cited "increasingly price-sensitive customers and an influx of low-cost carrier capacity" in reversing its projection for intercontinental economy fares, to 2 percent decline from 1 percent growth, and revising down growth forecasts for both regional business and economy fares (altered downward one and two percentage points, respectively to 2 percent and 3 percent).
In Latin America, Advito found that demand, while generally still strong, is showing "early signs of a loss of momentum, as fears of an economic slowdown emerge."
As such, it now anticipates that regional economy airfares will rise 3 percent on average; it previously expected them to increase about 5 percent.
For the Southwest Pacific region's intercontinental business and economy fares, Advito adjusted both downward to a 2 percent decline from the initial predictions of no change. It also now expects regional business and economy fares to fall 5 percent year over year versus earlier expectations of no change and a 1 percent decline, respectively. "With competition between Virgin Australia and Qantas intensifying, fares will fall," according to the report.
In the Middle East, citing "expansion by the Gulf carriers," Advito now projects intercontinental business fares to drop 2 percent versus the no change first forecast.
Advito did not adjust any price projections for Europe or Africa. On the former, it noted that "low-cost carriers' pursuit of corporate travelers in Europe will keep regional business fares flat." On the latter, Advito said that "expansion into Africa by Gulf carriers and Turkish Airlines will continue to depress intercontinental fares."