2017 Travel Pricing Predictions Around the World

Supplier rate increases, per se, may not be travel managers' biggest challenge in 2017. Instead, uncertainty—in emerging market performance, in the global economy, in geopolitical relationships and in financial markets, interest rates and commodity prices, oil, in particular—has produced a fragile business environment and potential volatility in major business markets around the globe, according to the 2017 business travel forecast, co-authored by the Global Business Travel Association and Carlson Wagonlit Travel.

Region by Region

Suppliers in North America will maintain the strongest overall price positioning for 2017, according to the report, which projected airfares in the region to rise 3.7 percent. Low oil prices and rising fares will allow North American airlines to reinvest in products and services. Hotel prices, continuing a soft landing from peak highs in some markets, will rise overall by about 4 percent. But it will be a tale of two coasts, with supply shortages on the West Coast driving prices up by low double digits while the East Coast may slide slightly backward thanks to low demand from Toronto's oil and gas industry and oversupply in New York. The report projected flat ground transportation rates for the region.

Europe, the Middle East and Africa, hit by recurrent terrorist activity and the uncertainty of Brexit, is among the most precarious regions when it comes to travel pricing projections. GBTA and CWT called it a "mixed bag" with airfares in Eastern Europe up as much as 4 percent due to lack of competition while rising a half-percent in Western Europe and 2 percent in both the Middle East and Africa. That said, Delta and Virgin Atlantic have announced capacity reductions for routes to the United Kingdom, based on stagnant business travel demand and Brexit concerns. Travel managers should keep an eye on whether other carriers follow suit. On the hotel front, low oil and gas revenues will put a damper on travel volume, particularly in Africa, the Middle East and Russia. Report authors anticipated a 2.5 percent drop in Russia's hotel rates, a 1.8 percent rise in Western Europe and a half-percent fall in the Middle East and Africa. Despite the Brexit vote, the report predicted a strong hotel market in the United Kingdom, with rates rising nearly 7 percent next year. Ground transportation is expected to remain flat throughout the region.

Suppliers in Latin America and the Caribbean will face rate decreases overall, according to the report. Airfares will fall 1.9 percent, while hotel rates are forecasted to drop by just under 1 percent. Ground transportation offers a dim ray of light, with rates projected to rise by half a percent. The oil markets will play a big role here, as will political and economic uncertainty in the region. The economic outlook in Brazil, which was an emerging business travel darling, has crumbled under oil and gas pricing pressures. Despite the fact that airlines have cut capacity in the region ruthlessly, report authors still predict a 7.1 percent drop in fares. Scarcity of basic resources in Venezuela and challenges in repatriating revenue for tickets sold in the country have prompted airlines to reduce or stop service to the market. Not only could this worsen the economic situation in the country, the report predicts more than a 10 percent spike in airfares and a more than 12 percent increase in hotel rates. Mexico may offer a healthier outlook in the region, with airfares projected to rise 4 percent and hotels to track a moderate 2.6 percent rate increase.

Asia/Pacific is looking at moderate growth in airfares and hotel rates in 2017. China is settling into a "new normal," after years of explosive growth. Airfares there will stall at less than half-percent growth. The strongest airfare increases in the region will go to Hong Kong, at 3 percent, followed by Indonesia at about 1 percent. Japan will see airfares decline 5.5 percent, and in Singapore, fares will drop nearly 3 percent, according to the report. Australia, Indonesia and New Zealand—and China to a lesser extent—are driving hotel rates 2.5 percent higher in Asia/Pacific overall. Australia hotel rates will jump 4.4 percent; the increase will be higher in Sydney and Melbourne, but rates will decline in western energy markets. A strong leisure market is poised to drive hotel rates up 7.6 percent in New Zealand. Conversely, report authors show Singapore rates dropping 5.7 percent in 2017 despite tight supply. India, where overbuilding has led to low occupancy, will see hotel rates decrease by 2.5 percent. Ground transportation rates appear flat in the region overall, but rates in Australia are expected to edge up by 2 percent.

"We are seeing relatively low, inconsistent and in some cases fragile economic growth," CWT CEO Kurt Ekert said about 2017. "Travelers and travel managers need to understand their travel patterns and spend and be alert to the impact of economic uncertainty and volatility."

In other words, while the global and regional pricing outlook gives a certain view, the market-by-market analysis tells the real story for travel managers. The report also underscored that travel managers should expect to be nimble and make significant changes to protect against market volatility. "Consider alternatives in all aspects of your program," report authors wrote, "and maintain flexibility with your list of preferred suppliers to ensure you can adjust and mitigate risks as market conditions evolve."