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Research: Hotel and airfare prices expected to rise

Travel prices are expected to rise sharply in 2019, with hotels going up 3.7 per cent, and flights 2.6 per cent, driven by a growing global economy and rising oil prices, according to the fifth annual Global Travel Forecast, published today by GBTA and CWT.

“While most major markets appear to be trending in the right direction, downside risks remain for the global economy given the rise of protectionist policies, the risk of stoking trade wars and Brexit uncertainty,” said Michael W. McCormick, GBTA executive director and COO.

“This forecast provides travel buyers with a better understanding of the global market and key price drivers demonstrating the key to building successful travel programs will be watching and reacting to an ever-changing global landscape.”

“Prices are expected to spike in many global markets even as inflation remains subdued,” said Kurt Ekert, President and CEO, Carlson Wagonlit Travel.

“The report explores the causes and includes an overview of what we expect to see in key markets worldwide. It also gives specific recommendations, giving travel managers ammunition for their upcoming negotiations.”

Released today by the Global Business Travel Association, the voice of the global business travel industry, and CWT, the global travel management company, the 2019 forecast also shows the trends and developments that will shape the business travel industry.

“The future of corporate travel can be summed up as accelerated personalization – with mobile technology, AI, machine learning and predictive analytics all playing their part,” said Ekert. “Success is tied to technology, with sophisticated data-crunching at the very heart of it.”

2019 air projections

The aviation sector will be shaped by the introduction of ultra-long-haul flights and an increasing competition from the low-cost carriers, which are not only multiplying but also fighting for long-haul routes – and by the airlines’ push towards NDC.

Airfares are likely to become more expensive due to rising in oil prices, the competitive pressure from the shortage of pilots, potential trade wars, and increasing fare segmentation to improve yield.

  • Asia Pacific expects to see a 3.2 per cent rise in 2019 pricing. Chinese demand remains high and by 2020 the country is expected to become the world’s biggest air travel market. In 2019 the country’s flights are seen going up 3.9 per cent. But China will not be alone. The vast majority of countries in the region will see price rises, especially in markets like New Zealand (7.5 per cent) and India (7.3 per cent). The latter is expected to be the world’s largest aviation market by 2025, with airports operating beyond capacity. The only exception in this booming region is Japan. Prices there will likely drop 3.9 per cent due to the country’s added capacity in preparation for the Olympic Games in 2020.
  • Across Europe, Middle East & Africa, air travel is anticipated to continue growing in Western Europe, with prices rising 4.8 per cent. The increase will be especially pronounced in Norway (11.5 per cent), followed by Germany (7.3 per cent), France (6.9 per cent) and Spain (6.7 per cent). Eastern Europe and the Middle East & African countries, on the other hand, will experience a decline of 2.3 per cent and 2 per cent respectively.
  • Prices across Latin America are expected to drop 2 per cent in 2019. However, México and Colombia will see slight increases –0.1 per cent and 1.2 per cent respectively– while Chile will experience a rise of 7.5 per cent.
  • North America will see prices rise by a modest 1.8 per cent, according to our projections. In the US, airlines are recalibrating to reflect better areas of demand, depending on how trade relationships change with key US allies and adversaries. The US aviation market is expected to see capacity compression due to expanded fare fragmentation, with premium economy and basic economy reducing available seats, as carriers target margin improvement.

2019 hotel projections

The hotel outlook for 2019 is driven by the overall increase in air travel, which will fuel demand for rooms. Technology will also play an important part. Hotels are introducing new developments to personalize the guest experience.

The increase of mobile penetration, on the other hand, is forcing travel managers to offer their travelers apps, which also serve to accommodate greater in-policy booking autonomy.

Further mergers – and upscale hotels competing with midscale ones due in part to a growing appetite for boutique accommodation among younger travelers – will also be on the agenda.

  • In Asia Pacific, hotel prices are likely to rise 5.1 per cent –with a large discrepancy as Japanese prices are expected to fall 3.2 per cent, but New Zealand is set to rise a whopping 11.8 per cent. In Australia, 2019 and 2020 are expected to bring the largest number of new rooms becoming available, with an increase of 3.4 per cent of total supply each year. In Indonesia, Swiss-Belhotel International is embarking on an expansion of its budget brand, Zest Hotels, with plans to triple its portfolio of properties within three years. Singapore is embracing technology and smart hotels are on the rise. In Thailand, optimism is running especially high after a period of political tumult.
  • Mirroring air prices, hotel rates across Europe, Middle East & Africa are expected to rise in Western Europe 5.6 per cent, while declining 1.9 per cent in Eastern Europe and 1.5 per cent in the Middle East & Africa. Again Norway will lead with a rise of 11.8 per cent, followed by Spain (8.5 per cent) –expected to replace the US as the world’s second most popular destination, Finland (7.1 per cent) and France and Germany (6.8 per cent).
  • Within Latin America, hotel prices are expected to fall 1.3 per cent, with declines in Argentina (down 3.5 per cent), Venezuela (down 3.4 per cent), Brazil (down 1.9 per cent) and Colombia (down 0.7 per cent). However, Chile, Peru and Mexico are expected to see 6.4 per cent, 2.1 per cent, and 0.6 per cent increases, respectively.
  • In North America hotel prices will go up 2.1 per cent — 5 per cent in Canada and 2.7 per cent in the US.

2019 ground transportation projections

Next year, ground transportation pricing is expected to rise only 0.6 per cent globally. However, by the fourth quarter of 2019, we will see a concerted effort by rental companies to raise prices.

2019 will also see a growing preference among travelers for ride-hailing apps while interest in high-speed trains is fading, due to high network costs and low-tech distribution systems.

Mobile mobility will rise. On-demand, shared, electric and connected cars will all become more popular. Connected car technology has the potential to change the entire automotive industry.

  • In Asia Pacific, markets like New Zealand (4 per cent), India (2.7 per cent) and Australia (2.4 per cent) will see increases. In China, giant Didi Chuxing is making big bets on autonomous driving. This year, Uber has sold its Southeast Asian business to Singapore-based Grab and Indonesian Go-Jek is expanding to Vietnam, Thailand, Philippines and Singapore.
  • In Europe, Middle East & Africa, countries like Finland, France, Germany, Italy and Spain will see increases of over 4 per cent, while Denmark and UK rates will grow 3 per cent and 2 per centrespectively. Norway will be in pole position with a 10 per centincrease. On the downside, prices will drop dramatically in Sweden (13.9 per centdown) and very slightly in Belgium (0.9 per cent down).
  • Prices in Latin America will show strong decreases in Argentina (9.7 per cent down) and Brazil (5.4 per cent down) and a more moderated one in Mexico (0.3 per cent). Chilean prices will be up 3.1 per cent.
  • In North America, Canada is expected to see a 3.6 per cent increase in 2019, and the United States a 1 per cent increase. In the U.S., the Audi-owned, app-based car rental service, Silvercar, continues its aggressive expansion. The company offers mobile-first car rental without the lines and paperwork.

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