Meeting Mentor Magazine

December 2018

Business Travel

Blame the High-Flying Economy
For 2019 Travel Cost Increases

With the global economy expected to hit 3.4 percent growth this year — with a similar increase predicted for 2019 — meeting professionals should anticipate that their attendees will have to shell out a bit more for airfare and hotels in 2019.

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Led by Asia, Europe and North America, a robust global economy likely will cause airfares to increase 2.6 percent, according to the recent Global Travel Forecast, co-published by the Global Business Travel Association (GBTA) and Carlson Wagonlit Travel (CWT). The report predicts hotel rates will rise even more — 3.7 percent — next year.

“Prices are expected to spike in many global markets even as inflation remains subdued,” said CWT President and CEO Kurt Ekert. However, growth rates will vary from region to region, and GBTA Executive Director and COO Michael W. McCormick warned that the specter of protectionist policies, Brexit-related uncertainty in the U.K., rising oil and gas prices, and the potential for trade wars could lay down some economic speed bumps.

The Wind Beneath Aviation’s Wings
The report anticipates that the biggest airfare increases will be in Western Europe, where they’re expected to rise 4.8 percent, followed by a 3.2 percent rise in Asia Pacific due in large part to increased demand from China. The U.S. is expected to see a more modest 1.8 percent rise, though all bets are off should a global trade war break out. Countries in Latin America, Eastern Europe, the Middle East and Africa all are expected to experience slight price drops in airfare, with Chile, Mexico and Colombia being the exceptions that prove the rule.

Factors that could influence air travel in 2019, according to the forecast, include:
a rise in jet fuel price as demand continues to outpace all other oil and gas products; pilots, who are getting even more expensive than jet fuel as the labor pool of available captains continues to drive up labor costs; and the prospect of a trade war between the U.S., its foes and its allies that, if current rumblings tip over into a full-fledged battle, could slow the global economy, which would also slow demand for business travel, the report concluded.

And don’t expect to see any decrease in fare segmentation — the report predicts more ancillary fees, restrictions and fares being offered for more diverse seating options in the near future. Also in the mix is an increase in ultra-long-haul flights of 17 hours or longer, and not just by the major airlines. Low-cost airlines are getting into the ultra-long-haul business as well, with carriers such as Iceland’s WOW Air now offering routes to select U.S. cities via New Delhi.

Hotel Hot Buttons
Just as global economic growth spurs more, and more expensive, air travel, so the increase in business travel spikes hotel room demand — and with it, room rates. This is especially true for markets experiencing increased demand for the first time due to those new ultra-long-haul flights, said the report. Also, while upper-scale hotels have been the staple for business travelers in the past, expect to see more midscale and boutique hotels coming online to meet the tastes of younger travelers.

Hotel rates in the U.S. will rise 2.7 percent, while Canada is expected to see a 5 percent increase. The report also predicts a healthy 5.6 percent rise in hotel rates for Western Europe. But the biggest hikes will be in New Zealand and Norway, which are both looking at an almost 12 percent increase.

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Singapore is building more smart hotels as smartphones gain a foothold in Asia, the report said. But you can expect to see more mobile travel bookings globally; Microsoft predicts that 85 percent of all customer interactions — including hotel booking — will be digitized by 2020. And other technological advances are fast becoming part of the hotel experience, including automated check-in, mobile keyless room access, beacons and even robots.

The report said it remains to be seen whether the post-Starwood acquisition Marriott International would “use their market scale and presence to increase prices above market rates in 2019,” though it also said the Marriott merger “has triggered mergers across the board, as brands race for rapid and significant growth by consolidation.” — Sue Pelletier

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