Egencia: Air Ticket Prices Rise 13 Percent In North America

Average first-quarter ticket prices for travel within North America rose by an average of 13 percent compared to a year ago, according to an analysis of OAG, ARC and Expedia data analyzed by Egencia for an annual global benchmarking report.

Egencia officials largely attributed the higher ATPs to rising fuel costs, tightly managed capacity and increased demand in some points of sale. "Fuel was not as much of an issue last year," said Chris Vukelich, newly appointed Egencia Americas vice president of supplier relations. "Now [airlines] have the double whammy of demand up and fuel."

Double-digit percentage increases for U.S. average ticket prices for North American points of sale were found in San Diego and Houston (17 percent each), Seattle (16 percent), San Francisco, Chicago and Phoenix (15 percent each), Los Angeles (13 percent) and New York (12 percent).

Such prices increased even more in Canada, with Calgary up 28 percent, followed by Montreal at 20 percent and Toronto at 19 percent. "Canada is an interesting market," Vukelich said. "Demand is back and one carrier, Air Canada, holds significant share. They are effectively in the drivers' seat with regard to pricing."

From North America, first-quarter average ticket prices to destinations in Europe rose 1 percent compared to a year ago, while ATPs to Asia declined 4 percent.

European Points Of Sale

For European points of sale, Egencia found that year-over-year average prices to European destinations decreased by an estimated 4 percent, while ATPs to North American destinations increased by 8 percent.

"Increased ATPs can be attributed to rising fuel prices (although the fuel price in euros hasn't risen as much as the fuel price in U.S. dollars due to currency fluctuations), tightly managed capacity by airlines and airline consolidation and alliances," according to Egencia. "Decreased ATPs can be attributed to overall financial vulnerability of the Euro-zone, increased competition from low-cost carriers, increased competition with high-speed rail, and slowing demand."

Average ticket prices for intra-European travel rose in Munich (9 percent), Dublin (3 percent) and Frankfurt (1 percent), but declined by as much as 13 percent for Manchester and Milan, 11 percent for Barcelona and 10 percent for Stockholm and Marseille. Average ticket prices declined from Amsterdam (7 percent), Glasgow (5 percent) and Madrid and Berlin (4 percent each). However, Egencia noted average prices for transatlantic travel rose 13 percent to or from Chicago (13 percent), Los Angeles (9 percent) and New York (7 percent).

Asia-Pacific 'Mixed Landscape'

Egencia officials found a "mixed air pricing landscape, varying on a market-by-market basis" in the Asia-Pacific region. Air pricing for intra-APAC destinations decreased by an average of 2 percent year over year, with prices for North American destinations down by an average of 1 percent.

"Decreased ATPs can be attributed to increased competition in the local markets, increased capacity on the majority of routes, and the domestic and international pricing battle for Australia," according to the study.

The largest year-over-year ATP increase in the Asia-Pacific region was recorded for trips to New York (17 percent). Fares to San Francisco declined 8 percent, while those to Los Angeles dropped 4 percent.

Intra-APAC average ticket pricing in the quarter rose 5 percent from Hong Kong, 4 percent from Singapore and 2 percent from Melbourne. ATPs declined from Tokyo (10 percent), Delhi (7 percent), Sydney (5 percent), Shanghai (2 percent) and Beijing (1 percent) and were flat from Mumbai, according to the analysis.

Hotel Rates Up, Car Prices Down

Air isn't the only rising travel cost. Average daily hotel rates in the first quarter "increased in most major business destinations, reversing the downward trends from the previous year," according to Egencia. "The increase in ADRs can be attributed to the return of corporate demand, reduced scale of new supply and improved occupancy."

"Hotel rates have recovered much faster than in the last downturn," Vukelich added.

In North America, first-quarter ADRs the rose 17 percent in San Francisco, 10 percent in Dallas and 7 percent in both Boston and Los Angeles, all compared to a year earlier, according to Egencia's analysis of ARC, Smith Travel Research, OAG and Expedia internal data. ADRs rose 6 percent in New York, Philadelphia and Phoenix and 5 percent or less in Chicago, Seattle, Calgary, Montreal, Denver, Houston, Washington, D.C., Toronto, Minneapolis and Atlanta. ADR plummeted 27 percent in Vancouver, according to Egencia.

"The sophisticated buyer now knows that there's a blended approach to how you buy hotels," Vukelich said. "You negotiate your own rates with some and others you buy on the spot market as you can. Your success is going to be driven by your willingness to guide people to a policy."

In the car rental sector, Egencia said per-day rates in Q1 declined by an average of 5 percent compared to a year ago and were comparable to 2008 rates.

"There was a time when [car rental companies] stopped buying vehicles," Vukelich said. "They've now started to increase supply, which means their fleets are bigger, so perhaps there's a little more competitiveness going on."

Travel Volume Expected To Rise

Despite increased air and hotel costs, 54 percent of nearly 350 buyers surveyed by Egencia as part of the study indicated that they expected their companies' travel volumes to increase during the remainder of 2011.

"That's a reflection of continued optimism" in the recovery, Vukelich said. "It reflects the fact that you have to run your business, people have to travel, their own businesses have recovered and people have to get back out on the road. It's that very bit of getting back out on the road that's driving ADR up."

Noting the significant increase in ADR and ATP in some markets, Vukelich said, "The numbers demonstrate how sophisticated the airlines and hotels have gotten. They've done a much better job bringing their businesses out of this last economic downturn than after Sept. 11. Airlines have been disciplined about their revenue management and capacity. Hotels also have been disciplined about capacity. There are not as many new rooms coming into the market."

Nearly 80 percent of buyers surveyed cited "cost control/reducing expenses" as the "greatest challenge facing travel programs." Forty-three percent of buyers indicated travel satisfaction was a challenge, 42 percent cited "travel compliance/policy enforcement," and 40 percent cited capturing a full view of travel spend.

Nearly 40 percent of buyers surveyed indicated they planned to negotiate more this year than in 2010, and 17 percent said they planned to change their travel polices during 2011.

Implementing effective policy is key to reducing negotiated rates, but traveler compliance and corporate culture are key considerations, Vukelich said. "Corporations have personalities, the same as people," he said. "Some customers are highly focused: Savings is what matters. Their people will do what matters to drive the savings. Others are softer on that. Satisfaction is an important factor, and it's not about how cheap it is."