HomeTrendsBuoyant Global Economy Means Higher Hotel and Air Prices in 2019

Buoyant Global Economy Means Higher Hotel and Air Prices in 2019

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

“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 on 24th July 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% 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%. 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%) and India (7.3%). 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% 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%. The increase will be especially pronounced in Norway (11.5%), followed by Germany (7.3%), France (6.9%) and Spain (6.7%). Eastern Europe and the Middle East & African countries, on the other hand, will experience a decline of 2.3% and 2% respectively.

Prices across Latin America are expected to drop 2% in 2019. However, México and Colombia will see slight increases –0.1% and 1.2% respectively– while Chile will experience a rise of 7.5%.

North America will see prices rise by a modest 1.8%, 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% –with a large discrepancy as Japanese prices are expected to fall 3.2%, but New Zealand is set to rise a whopping 11.8%. In Australia, 2019 and 2020 are expected to bring the largest number of new rooms becoming available, with an increase of 3.4% 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%, while declining 1.9% in Eastern Europe and 1.5% in the Middle East & Africa. Again Norway will lead with a rise of 11.8%, followed by Spain (8.5%) –expected to replace the US as the world’s second most popular destination, Finland (7.1%) and France and Germany (6.8%).

Within Latin America, hotel prices are expected to fall 1.3%, with declines in Argentina (down 3.5%), Venezuela (down 3.4%), Brazil (down 1.9%) and Colombia (down 0.7%). However, Chile, Peru and Mexico are expected to see 6.4%, 2.1%, and 0.6% increases, respectively.

In North America hotel prices will go up 2.1% — 5% in Canada and 2.7% in the US.

2019 ground transportation projections
Next year, ground transportation pricing is expected to rise only 0.6% in North America, while prices in the rest of the regions will remain flat. 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 rates will stay flat overall with increases in markets like New Zealand (4%), India (2.7%) and Australia (2.4%). 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.

Prices in Europe, Middle East & Africa are expected to remain flat overall. However, countries like Finland, France, Germany, Italy and Spain will see increases of over 4%, while Denmark and UK rates will grow 3% and 2% respectively. Norway will be in pole position with a 10% increase. On the downside, prices will drop dramatically in Sweden (13.9% down) and very slightly in Belgium (0.9% down).
Prices in Latin America will also remain flat overall, with strong decreases in Argentina (9.7% down) and Brazil (5.4% down) and a more moderated one in Mexico (0.3%). Chilean prices will be up 3.1%.

In North America, Canada is expected to see a 3.6% increase in 2019, but the overall region will only be up 0.6%. In the US, 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.

About the 2019 Forecast
The projections in the 2019 Global Travel Price Forecast are based on:
A statistical model, developed by GBTA with market and economic research firm, Rockport Analytics, that evaluates historical price behavior and forecasts future price references.

The market-specific expertise and travel industry knowledge of CWT and CWT Solutions Group personnel worldwide.

Information sourced from Moody’s Analytics, the International Monetary Fund Research Department, the United Nations and other leading organizations.

Projections are based on transaction data from CWT’s global client portfolio, including anonymized client travel patterns, over the past seven years. Key macroeconomic and per-country indicators, such as current and expected GDP growth, the consumer price index, unemployment rates and crude oil prices, were used in the statistical model, as well as key supply-side drivers sourced from OAG and STR Global. All air statistics represent point of origin and include all trip types.

Devender Grover
Devender Groverhttps://travelspan.in/
Devender was born in the year when the Beatles Group was formed. He holds two master’s degrees in English Literature and Public Administration. He also has an Honors degree in English Literature and a post-graduate diploma in Corporate Communications and Public Relations. He ventured into business, forming his own Media House, Profiles Media Network Private Limited, a twenty-year-old company. Excelling as an editor, Marketing, PR, Anchor, and Advertising specialist, he is now expertly navigating the world of social media. A widely traveled professional internationally, Devender has a deep understanding of Travel and Tourism, Fashion and Lifestyle, Aviation, and Hospitality Industry. Connect with Devender Grover @ travelspan@gmail.com

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