Global hotel rates will rise modestly in 2020 compared with previous
years, by 1.3 percent, according to CWT's 2020 Global Travel Forecast, as supply
growth is likely to continue to outpace demand growth in 2020. Global airfares
are expected to rise by 1.2 percent. Load factors are likely to fall somewhat
from current levels while low-cost carriers will continue to put downward
pressure on fares.
Projections are based on a statistical model developed by Rockport Analytics and the Global Business Travel Association, CWT client transaction data over the past 10 years, CWT experts' knowledge and information sourced from publicly known organizations like the United Nations.
Asia/Pacific
Air
CWT warned travel buyers to keep an eye on international crude
oil disputes, which could disrupt oil flows. In particular, the U.S. has
implemented sanctions against Iran, and China is defying them.
India-based carrier Jet Airways' shutdown
of operations has reduced competition on key routes, leading to higher
airfares. On top of that, air capacity fell after the grounding of the Boeing
787 Max and several Airbus 320 Neo aircraft in the first quarter.
On a positive note, carriers are adjusting their contracting
discounts and looking for hedging opportunities on a regular basis, according
to CWT. Carriers are increasingly able to anticipate changes that might impact
the cost of travel, the report said.
Airport capacity is growing in the region. In Beijing,
Daxing International Airport, which is scheduled to open in September, will
relieve pressure on Beijing Capital International Airport, which has been
operating at full capacity and experiencing regular flight delays. The Airport
Authority Hong Kong plans to invest $18 billion dollars to enhance its airport,
according to CWT. India plans to open nearly 100 more airports over the next
two decades and have 190 to 200 operational airports by 2040, the report said,
citing the India Ministry of Civil Aviation. The country's commercial airline
fleet is projected to grow from 622 in March 2018 to 2,359 in March 2040.
Hotel
Asia's hospitality industry is booming. Hotel investment
volume is predicted to grow 15 percent from 2019 to 2020. China and India hotel
inventory will expand significantly, as will Malaysia's, where 13 hotels will
open in 2020, the report said.
Citing CBRE, CWT reported that around 80,000 new hotel rooms
will open in nine major Japanese cities between 2019 and 2021. Japan will host
high-profile events, as well, including the 2020 Summer Olympics. The report
concluded there's a minimal risk of oversupply thanks to high demand and an
increased number of inbound tourists, which could reach 40 million annually in
the coming years.
The report noted that travel buyers are reducing the number
of contracts they have in Singapore, Sydney and Melbourne, and this presents an
opportunity for creative sourcing and larger-scale relationships with
suppliers. Interest in chainwide discounts and dynamic pricing will continue,
and buyers will see less benefit from traditional advance purchasing and last
room availability terms.
EMEA
Air
Oil and gas-related business travel traffic between Western
Europe and the Middle East will remain high through 2020.
Turkish Airlines has added new routes and increased the
frequency of traffic between Eastern Europe and the Middle East as the carrier
grows operations at its new Istanbul hub. The new airport will enable better
service between Europe and Asia.
Similarly, business travel traffic between Europe and Africa
will increase thanks to Kenya Airways. The carrier's range of destinations and
high frequency between the continents, as well as its membership in the SkyTeam
alliance, will drive cost-effective travel to EMEA, the report found.
LCCs are increasing competition in Western Europe. CWT
anticipates that competition between legacy carriers and LCCs will lower fares
and adjust pricing as legacy carriers battle to regain market share. To make up
ground, carriers are likely to raise fares on intercontinental flights where
there is less competition.
Hotel
EMEA hotel prices will fluctuate between a 1 percent contraction
and 2.4 percent growth in 2020, the larger increases occurring in Eastern
Europe and the Middle East, according to CWT.
Keep an eye on Denmark and Egypt, the report said. Denmark's
growing economy and increased demand for accommodations, as well as expansion
of both suppliers and hotel capacity will bring rates down by 3.4 percent. Rates
in Egypt, meanwhile, will rise 4.7 percent thanks to a recovering economy. Cairo
is expanding its airport to welcome 8 million visitors annually.
EMEA hotels have started to shift toward dynamic pricing rather
than fixed-rate contracts. The report contends corporations will benefit most
from focusing negotiations on off-peak times in areas with little availability,
as volume discounts will be fewer and farther between. More companies are
introducing rate caps for bookings, especially in expensive cities like London,
putting pressure on hotels to honor group bookings and discounts.
Latin America
LCCs
have gained significant share in Brazil, Mexico and Colombia and in all three
markets are enticing travelers who previously would have taken intercity buses.
Brazil's aviation market is important to watch due to the
uncertainty around competition. The recent grounding of financially troubled carrier
Avianca will reduce the number of competitors in the country to three,
potentially causing airfare prices to rise. However, Spain-based Air Europa has
applied to operate domestic flights in Brazil, which could stabilize pricing
there. Brazil president Jair Bolsonaro's recent veto of legislation that would
have allowed one free checked bag up to 50 pounds per domestic passenger also
is a factor.
More than 10 chain hotels opened in Latin America in the
first quarter of 2019, and growth is set to continue throughout 2020. CWT
predicted properties in Mexico and across Latin America will continue to reduce
pricing.
North America
Air
Air prices are projected to rise in North America in 2020. Labor
costs will increase as pilot and maintenance unions negotiate contract renewals,
which will cause airlines to raise their ancillary fees and airfares. New Distribution
Capability and the tailored fare packages that result have the potential to
increase airline revenue streams and rebalance squeezed margins.
The 3.2 percent increase in airfare expected in Canada in
2020 owes primarily to private equity firm Onex's acquisition
of WestJet. The firm, the report predicts, will raise airfare prices to
recoup the acquisition's $5 billion price tag.
Hotel
Average daily rates will continue to grow steadily in North
America. As more hotels have opened, the demand for rooms now aligns with
supply, which will translate to a small slowdown in rates. Over time, that will
help correct the overinflated prices in some major cities.
ADR growth in technology markets like San Francisco, San
Jose, Seattle and Vancouver has slowed, compared with previous years. However,
prices in these cities are still quite high and have pushed business travelers
to book rooms outside city centers. In addition, hotels may work to avoid filling
rooms with heavily discounted corporate rates, and that could cause the tech
giants to shift from traditional hotel stays.