According to the fourth annual 2018 Global Travel Forecast, travel prices are expected to rise sharply in the coming year, reaching nearly four per cent increases in some sectors. Released by Carlson Wagonlit Travel (CWT) and the GBTA Foundation, the education and research arm of the Global Business Travel Association, The 2018 Global Travel Forecast shows global airfares are expected to rise 3.5 per cent in 2018; hotel prices are expected to be 3.7 per cent higher; and ground transportation such as taxis, trains and buses are expected to rise only 0.6 per cent – significantly less than the three per cent inflation forecast for 2018.
“The higher pricing is a reflection of the stronger economy and growing demand. The global numbers from this forecast should be considered strong leading indicators of what 2018 will mean for global businesses, as we anticipate higher spending,” said Kurt Ekert, president and CEO, CWT.
“Geopolitical risks, uncertainties in emerging markets and ever-changing political environments in Europe and the United States mean today’s travel professionals have more than ever to take into account when building their travel programmes. The most successful programmes will have to keep a watchful eye on both geopolitical risks and a rapidly-changing supplier landscape as they reevaluate strategy often and adapt as necessary,” said Jeanne Liu, vice president – research, GBTA Foundation.
Air projections – 2018
The uptick in global airfares comes as crude oil prices rise, in spite of airlines adding an expected six per cent capacity in 2018. Complicating airline pricing is increased segmentation of basic fares among large carriers. Travellers now have the option of choosing a basic economy, restricted fare versus various upgraded fares, with specific service options and pricing varying by airline.
Asia Pacific expects to see a 2.8 per cent rise in 2018 pricing with domestic demand increasing, particularly in China and India. However, as many of the economies in Asia strengthen, weaknesses in infrastructure – and airports in particular – are increasingly becoming apparent.
Across EMEA, air travel is anticipated to continue growing, with prices rising 7.1 per cent across Eastern Europe and 5.5 per cent in Western Europe. However, Middle East and African countries only expect a three per cent increase as they face ongoing security threats and an oil industry that is still in recovery. Currency fluctuations in Europe may further impact airfares in 2018. Given limited competition and the upcoming summer 2018 World Cup in Russia, Eastern Europe may again have the most significant price increases in the region.
Across Latin America and the Caribbean, prices are expected to change little in 2018 – up only 0.3 per cent. Airlines have cautiously added capacity back into the market. Broader analysis of South America shows a 20 per cent increase in scheduled flights by the end of 2019. Low cost carriers are well positioned for this area given the low penetration in the region. And, new, more efficient aircraft coming into in operation will lower operating costs in 2018. North America will see prices rise by a modest 2.3 per cent, according to the projections. Citing the potential for stronger US travel restrictions, flights to the United States have already been reduced accordingly. Canadian airlines are expected to aggressively compete given new market entrants and capacity growth of about 11 per cent in 2017 and 12 per cent in 2018. With the region’s air travel market nearly flat year-over-year in early 2017, competition is fierce between carriers who now compete on branded fares rather than on bundled fares or by carrier type.
Hotel projections – 2018
Globally, the 3.7 per cent average increase in hotel prices masks what is actually happening on a regional level. Europe is expected to post strong increases, while other regions are barely keeping up with inflation. Additionally, prices are expected to fall in Latin America and the Caribbean. CWT expects the impact of the 2017 mergers will be felt during the 2018 RFP season. Suppliers are progressively moving corporate buyers away from fixed, negotiated hotel rates and toward dynamic rate pricing. There is also a global trend towards “smarter” hotels, with hotels investing in beacon technologies, messaging, in-room entertainment and more. Increasingly tech-savvy guests will use apps to check in and out, unlock their hotel room door, operate the television remotely and control room temperature.
Across Asia Pacific, hotel prices are likely to rise 3.5 per cent – with a large discrepancy as Japanese prices are expected to fall 4.1 per cent, but New Zealand is set to rise a full 9.8 per cent. Strong economies means demand is increasing in the APAC region. Buyers should anticipate a more challenging discussion with newly merged hotel groups, especially in high-volume markets such as Bangkok, Beijing, Shanghai and Singapore.
Across EMEA, hotel prices are likely to rise – 6.6 per cent in Eastern Europe, 6.3 per cent in Western Europe, but only 0.6 per cent in the Middle East and Africa. Norway is expected to lead with increases of 14 per cent expected for 2018, while Russian hotel prices will rise 11.9 per cent due to increased demand from hosting the 2018 Summer World Cup.
Within Latin America, hotel prices are expected to fall 1.2 per cent, with steep declines in Brazil (down 8.7 per cent) and Argentina (down 2.7 per cent). However, Peru and Chile are expected to see 7.7 per cent and 5.5 per cent increases, respectively. Buyers may see efficiencies in 2018 as bigger brands purchase independents and upgrade systems. Capacity is being added throughout the region with an estimated 449,500 new hotel rooms being constructed between late 2016 and 2025 – a 57 per cent increase in supply. Sharing economy accommodations are still not popular for corporate travel in Latin America, given structural security concerns.
North America hoteliers may be banking on economic growth as demand has leveled off since mid-summer 2016 – but supply is expected to continue growing steadily through 2018. With international travel projected to grow four per cent in 2017 and 2018, US hotel growth is expected to be concentrated primarily along with the West Coast and in Washington DC. In Canada, Toronto, Vancouver and Montreal are expected to maintain good pricing power amid a weak Canadian dollar.
