Carlson Wagonlit Travel (CWT) released its 2013 Travel Price Forecast, which indicates that prices in most areas of travel spend are expected to grow modestly around the globe next year, with the most significant inflation expected throughout the Asia Pacific and Latin America regions.
CWT’s forecast combines a statistical model that uses CWT global client data with the market and industry knowledge of CWT experts around the world, to provide price projections for every region, as well as country- and local-level expectations for those destinations to which CWT clients most frequently travel. CWT’s forecast also addresses the additional factors that can directly affect overall travel spend and traveler satisfaction, such as safety and security and use of technology.
“Price increases in 2013 will begin to level off in most regions throughout the world compared to what travel buyers experienced in 2012, as booming economies like Asia Pacific’s begin to normalize, and as uncertainty remains in Europe”
“Price increases in 2013 will begin to level off in most regions throughout the world compared to what travel buyers experienced in 2012, as booming economies like Asia Pacific’s begin to normalize, and as uncertainty remains in Europe,” said Nick Vournakis, senior vice president, Global Product Marketing and CWT Solutions Group. “While slightly higher prices will be the reality again next year as demand for travel outpaces supply in most places, our forecast demonstrates there is still plenty travel buyers can do to watch costs and take care of travelers through other measures, including reexamining how they influence traveler behavior.”
Growth in Asia Pacific stabilizes, bringing modest price increases
The Asia Pacific (APAC) region has experienced strong economic growth over the past several years, which quickly drove prices upward. Growth in 2013 is expected to stabilize, which will likely lead to modest price increases, although specific results vary widely by country.
- Airline prices should increase about 2.5 percent in the APAC region during 2013, largely due to the number of low-cost carriers (LCCs) entering the market and holding pricing down from what would typically be observed in this part of the world.
- Average daily hotel rates in APAC will likely increase about 3.5 percent in 2013. Singapore will lead the way with an 8 percent increase amid strong travel demand and lagging supply; meanwhile, prices in Hong Kong will also increase more than the regional average as clients shift from 4-5 crown properties to 3-crown.
- APAC car rental rates will likely experience the highest inflation of anywhere in the world. CWT forecasts a 5.9 percent increase in 2013. Rates in Australia and New Zealand will perform quite strongly due to increased demand and more tightly managed fleets.
- Meetings & events spending will increase about 6 percent while group sizes will decrease around 3.8% as organizations attempt to mitigate rising supplier prices by holding a larger number of smaller meetings with fewer attendees and shorter durations.
The Latin America (LATAM) region continues to experience overall economic growth, though significant disparities continue to exist that will create varied travel pricing by country next year. The newly formed LATAM Airlines, which is now the world’s second largest airline by market value, will embark on its first full year of operation in 2013, which may result in improved routes and frequencies to, from, and within the region.
- Two pricing scenarios exist in LATAM’s air segment. Countries with healthy economies like Brazil and Chile will experience solid price inflation, while countries with weaker economies like Argentina, Colombia, Mexico, and Peru expect moderate decreases to only slight growth. Due to that, CWT expects 2013 airline pricing in the region to increase 1.3 percent overall.
- Average daily hotel rates in LATAM will likely rise about 6.3 percent during 2013. Brazil will see the largest increase in hotel rates, and in fact, is the only nation in CWT’s entire 48-country forecast expected to see double-digit price increases next year. This is due to strong demand and limited supply; however, that will soon change, as inventory is rapidly being added in Brazil to accommodate the 2014 FIFA World Cup and the 2016 Summer Olympics. Even underperforming economies will experience noteworthy price inflation given continued international demand amid stagnant construction pipelines.
- Car rental rates will likely increase 1.4 percent during 2013, primarily due to U.S.-based brands expanding operations in the region to meet increasing demand. However, Brazil-based Localiza is a major player that will offer an added element of competition to international suppliers in that market specifically.
- Per attendee per day spending increases for meetings & events in LATAM will be the highest in the world, with average increases of 11 percent. Meanwhile, group size will decrease about 7 percent. As in Asia Pacific, this dynamic will occur as buyers seek to offset higher supplier costs.
While the economies of the United States and Canada are experiencing slow and steady improvement, there is no major growth expected for the foreseeable future, which will help contain travel price increases in 2013 for most categories of spend.
- CWT forecasts airline pricing in North America to increase by 2.8 percent during 2013. Carriers in both countries will continue to stay disciplined about controlling capacity to ensure demand outpaces supply, enabling them to raise prices.
- Average daily hotel rates will likely increase 3.2 percent throughout next year. As always, increases will vary by market, with the top business destinations able to command much higher prices. Western Canada will experience particularly high increases based on an influx of foreign demand for the area’s energy and mining resources.
- For yet another year, car rental firms in North America will struggle to raise prices in 2013 as the marketplace remains highly competitive with only a few existing suppliers available to battle for corporate business. Given this reality, CWT forecasts pricing to decrease 1.1 percent.
- Meetings & events spending continues to grow, with an average 4.8 percent increase expected in cost per attendee per day, along with an average 6 percent increase in group size. Booking windows have increased 5% as organizations feel more confident about the future; given this, advance bookings for 2013 are already strong.
While Europe continues to face mounting economic uncertainty, most Middle Eastern and African economies are faring reasonably well. As such, the region overall will experience moderate travel price increases in 2013, though the tenuous economy could prompt significant changes at any point.
- Airfares will likely climb 2.5 percent during 2013, as carriers have been diligent in implementing tight capacity controls that continue to yield high load factors despite economic concerns.
- Average daily hotel rates will likely increase 1.3 percent during 2013. A decrease in post-Olympic demand for hotel rooms in London will bring 2013 rates down there. Meanwhile, increased interest in 3-crown properties is expected throughout France as brands invest in upgrading those offerings.
- CWT is also forecasting slight gains in car rental rates, with an increase of 1.2 percent in 2013. Recent consolidation in the EMEA marketplace, combined with aggressive growth plans of traditionally low-cost providers, is creating increased competition that will hold down prices.
- High-speed rail rates will likely increase 4.3 percent during 2013 as this mode of transportation continues to offer a competitive alternative to air travel in key markets. Notably, increases of up to 9 percent are expected in premium-class cabins, where corporate travelers typically ride to access free wireless internet and other amenities.
- Meetings & events spending will increase less than in other regions, with 1 percent increases expected in costs per attendee per day. As a result, there will be less pressure on EMEA-based organizations to reduce group sizes to offset higher prices, which will produce slight increases of about 3 percent.
CWT’s global 2013 price projections were formed from the combination of a.) a statistical model that evaluates historical price behavior and forecasts future price references; b.) the market-specific expertise and travel industry knowledge of CWT personnel worldwide; and c.) macro-economic information sourced from IHS Global Insight, the International Monetary Fund Research Department, and the United Nations. All monetary references are in U.S. dollars.
About Carlson Wagonlit Travel
CWT is a global leader specialized in managing business travel and meetings and events. CWT serves companies, government institutions and non-governmental organizations of all sizes in more than 150 countries and territories. By leveraging both the expertise of its people and leading-edge technology, CWT helps clients derive the greatest value from their travel program in terms of savings, service, security and sustainability. The company is also committed to providing best-in-class service and assistance to travelers. CWT services and solutions comprise Traveler & Transaction Services, Program Optimization, Safety & Security, Meetings & Events and Energy Services. In 2011, sales volume for wholly owned operations and joint ventures totaled US$28.0 billion.
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