Airfares & hotels only getting more expensive: research

A new report from Carlson Wagonlit Travel (CWT) hasn’t exactly painted the prettiest picture for the future of local airfare and hotel prices, with the rest of the world looking at increased prices as well.

The fourth annual 2018 Global Travel Forecast, produced in partnership with the GBTA Foundation, the research arm of the Global Business Travel Association, shows that travel prices are expected to rise sharply in the coming year, reaching nearly four per cent increases in some sectors.

Overall, 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, but it’s an increase nonetheless.

“The higher pricing is a reflection of the stronger economy and growing demand,” said Kurt Ekert, President and CEO, Carlson Wagonlit Travel.

“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.”

“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 reevaluate strategy often and adapt as necessary.”

So let’s get into it a bit more, shall we?

2018 in the aviation sector

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 VS 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 Asian economies strengthen, weaknesses in infrastructure – especially airports – are becoming apparent.
  • Across Europe, 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. 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.
  • 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. 
  • 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 20.0 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. With the potential for stronger US travel restrictions, flights to the US 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. 

2018 in the hotel sector 

Globally, the 3.7 per cent average increase in hotel prices doesn’t actually give a great indication of what’s going on at a regional level.

Europe is expected to show strong increases, while other regions are barely keeping up with inflation. Additionally, prices are expected to fall in Latin America and the Caribbean.  

There’s 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. 
  • 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 14.0 per cent expected for 2018, while Russian hotel prices will rise 11.9 per cent thanks 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. Capacity is being added throughout the region with an estimated 449,500 new hotel rooms being constructed between late 2016 and 2025.
  • North America hotel demand has levelled off since mid-summer 2016 – but supply is expected to continue growing steadily through 2018. US hotel growth is expected to be concentrated along with the West Coast and in Washington D.C. 

2018 in the ground transport sector

The price of ground transportation – that’s taxis, Ubers, those kinds of guys – is expected to rise only 0.6 per cent in 2018 (but 5.5 per cent by 2022).

Sharing economy players such as Uber and Lyft are expected to continue double-digit growth upwards of 10 per cent in 2018, before settling down into single-digit growth for 2019. Their growth is under threat by costly regulation and government bans.