New research from the GBTA Foundation and Carlson Wagonlit Travel has identified six hotspots where increased business travel demand is driving significant air price increases in spite of global air travel prices indicating that they will be essentially flat in 2016.
“Business travel is a leading indicator of global economic activity,” Joseph Bates, GBTA Foundation vice president of research, said in a statement. “The top-line pricing outlook for air, hotel and ground in 2016 is surprisingly stable. But when you dig deeper, the data reveal 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.”
The 2016 Global Travel Price Outlook provides global, regional and country-by-country projections for air travel, hotel, ground transportation and meetings & events prices in 2016.
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 percent and 0.8 percent respectively). See below for six hot spots in these regions.
- In Europe, Middle East and Africa, prices will see a small increase (0.4 percent).
- In North America, (0.5 percent) — with the U.S. slightly up (0.5 percent) and Canada sharply down (-5 percent).
Yet, global and regional numbers reveal only part of the picture. There are six countries that are seeing projected price increases as a result of higher demand, including:
- Colombia - by 3 percent, 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 percent, driven by strong domestic and international demand.
- Singapore - by 3 percent, driven by lower energy prices and less restrictive monetary policy that will fuel demand.
- India - by 2.6 percent, driven by spiking business and consumer confidence.
- China – by 2.8 percent, bolstered by domestic demand and strong demand despite slowing economic growth and business travel volume.
- Australia - by 2.7 percent, as improving business conditions will boost domestic air travel.
A seventh nation – Venezuela – is projected to see a 6.3 percent increase, caused by high inflation, the drop in oil prices and a currency fixed to the U.S. dollar.
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 percent — led by Singapore, Japan and Australia.
- In Europe, Middle East and Africa, hotel prices will see a moderate increase at 1.8 percent, 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 percent — due to high inflation in some nations, particularly Venezuela and Brazil.
- In North America, high demand will increase rates by 4.3 percent, driven by economic activity in the Bay Area, Los Angeles and other major U.S. cities.
Car rental pricing has been under pressure for a number of years. Demand isn’t rising sharply enough, and fleets are not being managed tightly enough, leading to stagnant rates globally and regionally. The most interesting trend we’re seeing globally revolves around the sharing economy. While we do not predict a significant impact on traditional car rentals globally, there may be an impact 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 percent increase in cost and an 11 percent 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 percent cost per attendee per day increase, with food and beverage pressures continuing to be a significant driver of costs.
What Is Driving Prices?
"As we were digging through the data, we noticed something very interesting," GBTA Executive Director & COO Mike McCormick wrote in his blog when the report was released. "Underlying the U.S. pricing outlook were a set of numbers regarding projected increases to hotel prices in U.S. cities that were somewhat surprising. Some hotel prices were projected to increase by 12 percent, while others were barely keeping pace with inflation.
"When you start to look at the 2016 metro market forecast for hotel prices, a pattern seems to emerge – that activity around the tech and entertainment industries is driving significant price hikes.
- San Jose – 12 percent increase
- San Francisco – 8.8 percent increase
- Los Angeles – 7.8 percent increase
- Boston – 7.7 percent increase
- Seattle – 5.5 percent increase
"Hotel prices, by contrast, are projected to be much more stable in larger cities that are home to a more diverse set of industries including government, agriculture, energy and finance.
- Dallas – 5.2 percent increase
- Houston – 3.0 percent increase
- Chicago – 2.9 percent increase
- Washington, DC – 2.0 percent increase
- New York – 1.0 percent increase
"To be sure, this is an area that clearly merits additional study and attention. We don’t have data on Austin, San Diego or Raleigh-Durham, three traditional tech centers. It would be interesting to see if they follow similar trends, or if they break from the pattern.
"Nevertheless, looking at projected increases in hotel prices can give us clues as to where economic activity is taking place, and where business travelers are heading to close their next big deal."