Two new studies are predicting rises in hotel and airline rates and a slightly expanded, but notably sluggish, growth in the corporate travel sector.
Egencia, a formidable travel management company owned by Expedia, recently unveiled its 2013 Global Corporate Travel Forecast for air fares and hotel rates and found Average Ticket Prices (ATPs) and hotel Average Daily Rates (ADRs) for top corporate travel destinations will be slightly up overall in Europe, North America, and Asia-Pacific.
Average Ticket Prices for airlines are expected to be slightly up (3%) in Europe (3%), in North America (5%), and Asia-Pacific (5%) in 2013.
Average Daily Rates for hotels are expected to be up slightly (2%) in Europe and North America (3%), and up slightly or flat (1%) in Asia-Pacific
Not surprisingly, last week Visa announced the results of a study run co-jointly with Global Business Travel Association (GBTA), the trade group for the world’s business travel managers. It found that economic turmoil in Europe, slower growth in China, and U.S. unemployment are expected to curb business travel growth in the United States through the end of the year. Businesses appear to be taking a cautious approach to their investment in travel until there is greater economic certainty.
GBTA expects total U.S. business travel spending to grow 2.6% for 2012 (to $257 billion by the end of the year). While this is a moderate increase since last quarter, the uptick in spending is largely being driven by rising business travel costs (as noted by Egencia in the above content of this article). In fact, total business trip volume is expected to reach $438.1 million for 2012 – a drop of 1.6% from 2011 (when total business trip volume was $445 million.)
“Corporations are in a wait-and-see mode and holding back on investment decisions that would help boost the economy,” said Michael W. McCormick, GBTA executive director and COO. “While companies aren’t cutting their business travel spend and we’re still seeing very modest growth, we are cautious about the outlook for the next several quarters. The looming ‘fiscal cliff’ is causing even more uncertainty, which we’re monitoring with real concern. This is an economy in need of some good news to shore up business confidence and encourage more travel.”
A Recovery Like None Other
The report also finds that job composition is different in this recovery compared with previous downturns particularly from the perspective of business travel. Job creation has been concentrated in sectors that are less travel prone. New retail, restaurant, and manufacturing workers tend to travel much less than their business service, financial or utility industry counterparts. As a result, business travel is not getting the bounce from employment growth in this recovery that was typical of past expansions.
Meanwhile, international outbound travel, which has been a boon to the U.S. business travel industry over the last few years, is expected to slow against the constraints of economic worries in Europe and halting economic growth in the developing world. For example, the volume of both imports and exports to China and the rest of the Far East is projected to slow over the next six quarters, leading to lower levels of business travel to and from the U.S.
GBTA projects international outbound spending to grow 2.5% in 2012, followed by a 7.7% rise in spending in 2013. In comparison, less than a year ago, the forecast was projecting growth figures of 5.5% and 11% in international outbound spend in 2012 and 2013, respectively.