Airfares are set to rise by 8.4 per cent, hotel rates by 8.2 per cent, and car rental charges by 6.8 per cent next year. Cost-per-attendee at meetings and events also forecasted to rise.
Global travel prices are predicted to continue to increase in the remaining months of 2022 and throughout 2023, according to the 2023 Global Business Travel Forecast, published today by CWT, the B2B4E travel management platform, and the Global Business Travel Association (GBTA), the voice of the global business travel industry.
Rising fuel prices, labour shortages, and inflationary pressures in raw material costs are the primary drivers of the expected price growth, according to the report, which uses anonymised data generated by CWT and GBTA, with publicly available industry information, and econometric and statistical modelling developed by the Avrio Institute.
The rise is on top of a predicted full-year 2022 increase in air fares of 48.5 per cent, hotel rates of 18.5 per cent, and car rental charges of 7.3 per cent.
“Demand for business travel and meetings is back with a vengeance, of that there is absolutely no doubt,” said Patrick Andersen, CWT’s Chief Executive Officer. “Labour shortages across the travel and hospitality industry, rising raw material prices, and greater awareness for responsible travel are all impacting services, but predicted pricing is, on the whole, on par with 2019.”
“What we are seeing now are multiple factors coming into play when corporate travel buyers and procurement officers model their travel programmes. This eighth joint annual forecast marries statistical travel data and trend analysis with macroeconomic influences to provide a cornerstone reference point for their corporate business travel planning ahead,” said Suzanne Neufang, Chief Executive Officer of GBTA.
Macroeconomic influences
The world economy shrank by 3.4 per cent in 2020 in one of the worst declines since World War II. Service sectors, including travel and hospitality, were hit especially hard, but the global economy recovered briskly, rising off the lows of 2020 and increasing 5.8 per cent in 2021. Economic growth moderates as the recovery lengthen, although another recession is a growing concern. The current base case scenario for 2022 is for three per cent growth, followed by 2.8 per cent growth in 2023.
Cautionary notes also highlighted in the 2023 Global Business Travel Forecast highlight the three main forces exerting pressure on the economy and the business travel industry. These include Russia’s invasion of Ukraine coupled with other geopolitical uncertainties, inflationary pressures pushing costs higher, and the risk of further COVID outbreaks that could restrict business travel.
Conversely, with businesses ranking sustainability among their top priorities and reflecting the accelerated importance of combating climate change, the report highlights greater visibility at the point of sale for greener travel options, as well as carbon foot-printing, and environmental impact assessment is an opportunity for the travel industry to actively assist in responsible choice-making.
Meetings and Events
Prices have increased in all regions across most categories of spend, fuelled by pent-up demand, a desire to build a company culture and an uncertain economic outlook. The cost-per-attendee for meetings and events in 2022 is expected to be around 25 per cent higher than in 2019, and it is forecasted to rise a further seven per cent in 2023.
Alongside pent-up demand, corporate events are now competing with many other types of events that were cancelled in 2020. And, with many companies having given up office space during the pandemic in favour of remote working, they are now booking meeting spaces when staff gather in person, further fuelling demand.
Shorter lead times for events, varying from one to three months versus six to 12 months, are also contributing to this perfect storm, perhaps underscored by corporate concerns that the situation they face today could change rapidly. That is particularly noticeable within Asia Pacific, which has been slower than other regions to re-open post-pandemic, with ongoing restrictions in China prompting clients to make sure their events can go ahead and as quickly as possible.
Air
Business travel airfares fell over 12 per cent in 2020 from 2019, followed by an additional 26 per cent decline in 2021. Economy ticket prices fell over 24 per cent from 2019 to 2021, while premium tickets fell 33 per cent. Prices are expected to rise 48.5 per cent in 2022, but even with this steep price increase, prices are expected to remain below pre-pandemic levels until 2023. Following an increase of 48.5 per cent in 2022, prices are expected to rise 8.4 per cent in 2023.
Rising demand and continued price rises on jet fuel, which have seen prices more than double in some markets to over USD160/barrel according to S&P Global, are putting upward pressure on ticket prices.
Premium class tickets comprised over seven per cent of all tickets purchased in 2019. The share of premium class tickets fell to 6.5 per cent in 2020 and to 4.5 per cent in 2021 but started to rise in 2022. Through the year’s first half, premium tickets made up 6.2 per cent of all tickets purchased. A rising share of premium class tickets will result in higher average fares as average ticket price comprises economy and premium.
International and cross-border bookings are recovering across most regions which will result in a higher share of international ticket bookings and a corresponding higher average ticket price despite uncertainties caused by the war in Ukraine. Following two years of minimal to no expenditure, business travellers are likely to be willing to spend more on tickets, especially as availability reduces due to labour shortages. This upward trend is largely due to widespread vaccine rollouts and border re-openings.
For more detailed information, including geographic breakdowns and greater in-depth insights into trends and analysis, please visit the report online, where you can also download a PDF version of the 35-page report.
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Featured image by Briana Tozour on Unsplash.
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