Average costs will continue to rise across business travel categories through next year, though the rate of increase should moderate through the end of this year and even more in 2024, according to the 2024 Global Business Travel Forecast published by CWT and the Global Business Travel Association.
On a global basis, price increases for 2022 "surpassed anybody's expectations" due to a combination of factors, including rebounding corporate demand, pent-up leisure demand, higher oil and jet fuel costs and labor shortages, said Richard Johnson, global head of CWT Solutions Group. In their forecast this time last year, CWT and GBTA projected, for example, a 48.5 percent year-over-year increase in the global average airfare for 2022. By the end of the year, the average ticket price had risen 72.2 percent to $749. The average daily hotel rate increased 29.8 percent year over year to $161, higher than last year's forecast projection of 18.5 percent.
"The good news is that for the next 18 months, we shouldn't expect anything like that kind of a spike," Johnson said. "If you can visualize a large wave crashing, then it recedes and starts to move out a little bit, it will be a bit more like that."
That does not mean, however, that ebbtide is within view.
Cost Increases Moderate Across Categories
The forecast—based on a combination of data from CWT and GBTA, publicly available information and modeling developed by the Avrio Institute—projects airfares for full-year 2023 will increase by 2.3 percent year over year to $766, followed by a 1.8 percent increase to $780 in 2024.
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Global air demand is nearing pre-pandemic levels, and airlines still are facing challenges in restoring capacity fully, particularly with the delay from some airline manufacturers in bringing some models to market, Johnson said. At the same time, airlines still are facing rising costs, with fuel prices high—albeit below peaks seen last year—and labor costs growing amid shortages in pilots and other key staff.
Many companies' corporate air travel volumes, meanwhile, remain below pre-pandemic levels, which puts them in a weaker negotiating position amid the increases.
For hotels, the forecast projects a 4.3 percent year-over-year increase in global ADR to $168 this year, followed by a 3.6 percent increase in 2024 to $174. Hotels are seeing high occupancy levels but also are facing higher costs in labor and other areas. Construction has not caught up to pre-pandemic levels, keeping the supply-demand equation in the hoteliers' favor.
North America's ADR growth was the highest of any region last year, up 33.8 percent to $174, but occupancy growth is moderating in the region. ADR in the region is forecast to increase 4 percent this year and 3.3 percent in 2024.
In general, buyers who can deploy such strategies as consolidating volume and demonstrating loyalty will see some opportunities in the category, Johnson said. "As we see the leisure demand start to even out, they're going to refocus on how they can get that corporate business."
For car rental, which in 2022 increased 9.8 percent year over year to a $45 average daily rental rate, the 2023 rate will increase by a further 6.7 percent, followed by a more moderate 2.1 percent increase in 2024. Margins have remained lean in car rental, which had significant supply challenges amid the pandemic, and suppliers are offsetting costs with rate increases, Johnson said.
The forecast said meetings and events costs will continue to rise as well. In 2022, the average cost per attendee per day increased 58.1 percent year over year to $160. This year, that should increase 5.6 percent to $169, and an additional 3 percent to $174 in 2024. The category has seen a more robust return in demand than expected, and incentive trip demand also is "exceptionally strong," according to the forecast.
A Silver Lining to Increases
A forecast with rate increases, particular on the more moderate side, is not necessarily bad news for buyers, Johnson said.
"Price rises generally are a good thing," he said. "They are a good indicator of a strong economy and strong confidence from buyers.
As of now, indicators point to corporate travel programs that are smaller, but the budgets will not necessarily be smaller amid the higher costs. Companies will be looking to invest in suppliers that can increase the overall experience of travelers and can support initiatives such as sustainability, according to Johnson.
The steep increases of 2022, meanwhile, mean it's likely time to stop using 2019 as a baseline for comparisons, with 2022 the new baseline moving forward, he said.