India, China, Colombia, Mexico, Singapore and Australia are the six hot spots where increased business travel demand is pushing up global air prices despite signs that they will be essentially flat in 2016.
The findings are from the 2016 Global Travel Price Outlook, a research paper from the GBTA Foundation, the education and research arm of the Global Business Travel Association (GBTA), and travel management company, Carlson Wagonlit Travel (CWT).
“Business travel is a leading indicator of global economic activity. The top-line pricing outlook for air, hotel and ground in 2016 is surprisingly stable. But when you dig deeper, the data reveals global hot spots where demand is driving air travel price increases. For 2016, India, China, Colombia, Mexico, Singapore and Australia are projected to top the list,” said Joseph Bates, GBTA Foundation vice president of research.
Added Christophe Renard, vice president, CWT Solutions Group: “The data provides a compelling picture of a dynamic business travel industry. For cost-conscious travel managers, this outlook can help drive opportunities and cut costs to stretch every travel budget further.”
Below is a snapshot of the report’s projections for air travel, hotel, ground transportation, and meetings & events prices in 2016.
Air
Airline prices are set to be nearly flat on a global basis due to significantly lower energy prices, steady increases in capacity and stable demand. Regionally, the report projects:
- Asia Pacific and Latin America – small price increases (1.2% and 0.8% respectively).
- In Europe, Middle East and Africa, prices will see a small increase (0.4%).
- In North America, (0.5%), with the U.S. slightly up (0.5%) and Canada sharply down (-5%).
The six countries that are seeing projected price increases as a result of higher demand:
- Singapore – by 3%, driven by lower energy prices and less restrictive monetary policy that will fuel demand.
Singapore is one of the six hot spots driving air price increases. (Image credit: MasterLu/iStock)
- Colombia – by 3%, caused by a rapidly growing middle class and relatively stable economy, which are driving demand while capacity has grown at a modest rate.
- Mexico – by 3%, driven by strong domestic and international demand.
- India – by 2.6%, driven by spiking business and consumer confidence.
- China – by 2.8%, bolstered by domestic demand and strong demand despite slowing economic growth and business travel volume.
- Australia – by 2.7%, as improving business conditions will boost domestic air travel.
A seventh nation, Venezuela, is projected to see a 6.3% increase, caused by high inflation, the drop in oil prices and a currency fixed to the US dollar.
Hotel
Globally 2016 will show an increase in hotel prices because demand is overtaking supply in every major global region:
- Asia Pacific will see hotel prices rise by 3%, led by Singapore, Japan and Australia.
- In Europe, Middle East and Africa, hotel prices will see a moderate increase at 1.8%, although many European countries will experience price increases in local currency due to exchange rates with the U.S. dollar. Prices in Russia will rise significantly due to the impacts of the drop in oil prices and sanctions on its economy.
- In Latin America, prices will rise 3.7% due to high inflation in some nations, particularly Venezuela and Brazil.
- In North America, high demand will increase rates by 4.3%, driven by economic activity in the Bay Area, Los Angeles and other major U.S. cities.
Ground
Car rental pricing has been under pressure for a number of years. Demand is not rising sharply enough, and fleets are not being managed tightly enough, leading to stagnant rates globally and regionally. The most interesting trend globally revolves around the sharing economy. While it may not have a significant impact on traditional car rentals globally, they may be an impack to rental car companies’ car share and sedan/black car segments.
Meetings & Events
Across the globe, only modest increases are expected in cost per attendee per day and group size, with the exception of Asia Pacific which will see a 5% increase in cost and an 11% increase in group size. Strong demand from China and India is the major driver for the region’s increasing cost and group sizes. North America will also see a 4.5% cost per attendee per day increase, with food and beverage pressures continuing to be a significant driver of costs.
The full report is available here.
