2018 Air Projections
The uptick in global airfares comes as crude oil prices rise, in spite of airlines adding an expected 6% 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.
Across EMEA, air travel is anticipated to continue growing, with prices rising 7.1% across Eastern Europe and 5.5% in Western Europe. Middle East and African countries only expect a 3% increase as they face ongoing security threats and an oil industry that is still in recovery. 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.
North America will see prices rise by a modest 2.3%. Citing the potential for stronger U.S. 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% in 2017 and 12% 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.
2018 Hotel Projections
Globally, the 3.7% 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.
Across EMEA, hotel prices are likely to rise - 6.6% in Eastern Europe, 6.3% in Western Europe, but only 0.6% in the Middle East and Africa. Norway is expected to lead with increases of 14% expected for 2018, while Russian hotel prices will rise 11.9% thanks to increased demand from hosting the 2018 Summer World Cup.
On a more global perspective, across Asia Pacific, hotel prices are likely to rise 3.5% - although Japanese prices are expected to fall 4.1%. Strong economies means demand is increasing in the region and buyers should anticipate a more challenging discussion with newly merged hotel groups. In Latin America, hotel prices are expected to fall by an average of 1.2%, with a steeper decline in Brazil. North American hoteliers may be banking on economic growth as demand has levelled off since mid-summer 2016 – but supply is expected to continue growing steadily through 2018.
Carlson Wagonlit expects the impact of the 2017 hotel mergers to 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 and in-room entertainment. 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.
Ground transportation pricing is expected to remain relatively stable in 2018, up by only 0.6% (but 5.5% by 2022). Industry experts predict record new car sales over the next five years, pushing up per unit fleet costs. Used car pricing is expected to fall by 50%, hurting residual value for used rental cars and making current rental car pricing unsustainable. Market-specific regulations for curbing emissions, and rising oil prices have suppliers’ already increasing availability of “green” rental cars. Rail continues to be a viable alternative to air travel throughout Europe, especially with enhanced security at airports.
Sharing economy players such as Uber and Lyft are expected to continue growth of upwards of 10% in 2018, before settling down into single-digit growth for 2019. Their growth is under threat by costly regulation and government bans.
“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 programs,” said Jeanne Liu, GBTA Foundation vice president of research. “The most successful programs will have to keep a watchful eye on both geopolitical risks and a rapidly-changing supplier landscape as they re-evaluate strategy often and adapt as necessary.”
To download the full Global Travel Forecast visit: http://www3.gbta.org/l/5572/2017-07-13/574knd