Supplier Prices Expected to Hold Steady
by Barbara Peterson /Orlando--After several years of rising air fares and hotel rates, supplier prices across the travel spectrum should hold steady from now through 2106, according to a study conducted by Carlson Wagonlit Travel (CWT) and the Global Business Travel Association Foundation (GBTA).
The report, released at the recent GBTA convention here, should be good news for corporate travel agents and travel management companies who are locking down corporate rates and arrangements for the coming year. The research drew on a variety of sources, ranging from general economic forecasts to CWT transaction data, and other industry statistics.
In a presentation to delegates , Yon Abad of CWT and Jon Gray of Rockport Analytics pointed out that demand for business travel is high, with business travel spending forecast to rise 6.5% annually for the next two years.
But while rising demand might normally drive up prices, in fact, airline prices globally are expected to be flat in 2016, with a negligible increase of 0.5%., over 2015, when fares are up around 2.2%.
North America and Western Europe fares will barely register any increase due to new competition and added capacity. Asia Pacific will see the biggest fare hike of all world regions, but even there ticket prices are predicted to rise just 1.2%.
Hotel prices
Hotel prices worldwide will rise an average of 2.5% next year, as the traditional lodging companies come under pressure from the growth of the sharing economy and a boom in mid-scale hotel properties.
However, some regions of the world are seeing higher-than-average rate hikes due to high demand and limited supply.
The study predicted that prices in North America will jump by 4.3% , followed by a 3.7% rise in Latin American and Caribbean room rates. By contrast, Western Europe will remain virtually unchanged with price hikes of 0.7%.
For ground transportation, the outlook is even better.
Global car rental rates are forecast to rise 0.1% in 2016, and didn’t change at all in 2015.
Once again, the sharing economy – and such alternatives as Uber and Lyft – are cutting into demand for traditional modes of travel. This presents a “big, untapped opportunity for corporate buyers,” the study noted, with this segment accounting for 4% to 6% of a company’s total travel spending.
Some of the more surprising results came in a segment looking at specific business destinations, including the six top U.S. cities for corporate travelers.
While corporate air fares are rising only slightly, ranging from zero percent in Los Angeles to 2.5% at Atlanta, hotel prices varied widely, with lodging rates in San Francisco expected to rise by 8.8%, followed closely by Los Angeles with a 7.8% hike.
In contrast, New York City’s hotel prices will increase just 1% -- although the Big Apple’s rates are already among the highest in the nation. Atlanta, Houston and Chicago will see prices jump by 4.5%, 3% and 2.9%, respectively.