A new study by CWT and the Global Business Travel Association has found that costs for business travel and events will continue to climb higher through the remainder of 2023 and into 2024, though at a much more moderate pace than the exceptionally steep increases of 2022.
The 2024 Global Business Travel Forecast notes that rising fuel prices, labour shortages, and supply chain challenges, coupled with red hot demand, caused travel prices to skyrocket in 2022.
Average ticket prices for air travel soared by 72.2% last year, nightly hotel rates rose by nearly 30% and car rental rates by just under 10%. The average cost per attendee/per day for meetings jumped by 58.1%.
The study results suggest that lingering economic uncertainty and a gradual easing of supply-side constraints are expected to result in more subdued price increases over the next 12-18 months.
Patrick Andersen, CEO, CWT. (Photo Credit: CWT Media)
"A potent combination of demand and supply-side pressures propelled travel prices higher than expected last year," said Patrick Andersen, CWT's Chief Executive Officer.
"Looking forward, prices seem to be levelling off with much milder increases projected over the next 12 to 18 months. We could now be looking at the true new cost of travel. Our focus remains on helping our customers find the right strategies and solutions to get the most out of their travel budgets, meet their ESG commitments, and maximize the ROI on their travel spend."
Andersen continues: "As this research outlines, it's clear that rising costs and pricing pressures will likely continue to be a significant factor in business travel for the foreseeable future. And as we experienced over the past few years, we may also continue to see different pricing fluctuations across industry verticals, business sectors and global regions.”
Suzanne Neufang, Chief Executive Officer, GBTA, says the study contains important insights.
“While business travel continues to rebound, there will be a continuing balancing act among demand, cost, and ESG concerns. So, with a forecast ahead for more volatility, our goal is to provide insights like these to help travel buyers, suppliers, intermediaries and finance executives continue to understand, evaluate and adjust their business travel strategies."
Airfares Flying High
The global average ticket price (ATP) of flights booked for business travel rose at a record pace in 2022. The ATP rose by 72.2% YoY to $749 in 2022, far surpassing 2019 levels ($670). While demand has recovered strongly with passenger numbers quickly approaching pre-pandemic levels, airline capacity continues to be constrained by labour shortages and supply chain issues. Looking forward, ATP growth is likely to be more modest at 2.3% in 2023 and 1.8% in 2024, albeit from an already high base.
The study also notes that many corporate buyers now have less leverage to negotiate with airlines, as their travel volumes remain below pre-pandemic levels.
Accommodation Acceleration
Like air travel ATPs, the global average daily rate (ADR) for hotel bookings soared by 29.8% YoY to $161 in 2022. Occupancy rates have been high, but so have labour, energy, and food and beverage costs.
Several cities across the globe, including London, Miami, and Singapore, reported their highest ADRs on record in 2022. Meanwhile, hotel construction remains down from its pre-pandemic peak, creating supply constraints.
With fewer properties to compete against, existing hotels can sustain their pricing power for longer, the CWT/GBTA forecast states, even though ADR gains are slowing. ADRs are projected to climb a further 4.3% in 2023 to $168, followed by a 3.6% increase to $174 in 2024.
North America saw the highest growth in hotel ADRs of any region in 2022, rising 33.8% YoY to $174. Occupancy in the region is expected to grow at a slower pace in the second half of 2023 and 2024 due to economic concerns, with ADRs forecast to rise 4% to $181 in 2023 and 3.3% to $187 in 2024.
Road Rash
Car rental supply has been constricted as companies sold vehicles during the pandemic when demand collapsed. As business returned, vehicles were not replaced at pace due to supply chain issues, largely due to a worldwide shortage of vehicle semiconductors which led to inflated vehicle prices.
The 2024 Global Business Travel Forecast says these factors have contributed to prices rising by 9.8% YoY in 2022, with a further 6.7% increase forecast this year. Pricing growth is expected to cool to 2.1% in 2024.
Meetings Still Matter
The study found that in-person meetings and events have rebounded more robustly than many had expected. Client acquisition and relationship building are key business goals that are not easily executed virtually. There has also been exceptionally strong demand for incentive trips, as companies seek to motivate and reward employees.
The average daily cost per attendee was $160 in 2022. This is expected to increase to $169 in 2023 and then $174 in 2024.
The forecast notes that lead times for events remain short in the post-pandemic world. It suggests that organizers should now look at 2024 with a 12-month planning cycle if they want to keep prices at a reasonable level. At the same time, consolidating transient travel and M&E spend can give buyers more leverage when it comes to negotiating pricing.
For more detailed information, including regional breakdowns and insights and analysis on these pricing trends, please view the full report online or download a PDF version.
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