Price of Business Travel to have Mixed Impact in 2014

Aeroplane - Easyjet 2

Business Travel (Photo credit: puddy_uk)

Country-specific trends such as Brazil’s preparation for upcoming global sporting events, Germany’s relative economic strength within the Eurozone and China’s stabilising growth are expected to contribute to a slight uptick in business travel prices within specific regions. In addition, supply-side dynamics, including more low cost carrier options, weaker demand for business class air travel due to more stringent corporate policies and lack of new hotel construction (or oversupply in some areas) across specific regions are expected to have a greater impact on pricing changes.

North America

Overall, North American business travelers can likely expect mixed price changes across travel categories in 2014. With minor exceptions, North American airfares are expected to decline in 2014 as a result of heightened competition from low cost carriers, challenging unemployment levels and corporate travel policies becoming more stringent in regard to business class travel. However, pending consolidation among major U.S. airlines may offset these expected declines.

Predicted hotel rates in North America are expected to be up overall; however, the predictions for individual cities are expected to vary widely. Hotel prices in North America’s main travel regions – key business and tourism destinations such as New York and Toronto – will likely continue to grow, but it appears that secondary locations have become saturated with supply and are expected to be more competitive.

Consolidation continues in the North American ground industry and car manufacturers are expected to increase prices on their fleet. Car rental companies may pass the higher costs on to their customers, which may result in moderate price increases in car rental base rates. Key suppliers are also exploring car sharing programs in specific regions as an alternative that can offer increased flexibility and lower costs for corporate clients compared to public transportation.

Latin America

As Latin America’s larger economies slow down after a period of growth, changes in airfare and hotel rates are likely to vary country-to-country. Local economies in Argentina, Brazil and Chile are expected to have the greatest impact on business travel costs in the region in 2014.

Demand from U.S. companies with manufacturing facilities in Latin America will likely help create a seller’s market and contribute to mid- and upper-range property increases. Brazil is expected to continue to lead in occupancy levels, and in preparation for a global sporting event taking place in 2014, may also experience additional increases in hotel rates next year.

In the ground transportation category, rising demand is likely to translate into base rate increases, especially as activity from multinational companies and new hotel construction increases in the region.

Europe, Middle-East, Asia (EMEA) Predictions & Dynamics

Companies should expect to pay slightly more overall for business travel in EMEA in 2014, as suppliers likely make adjustments across air, hotel and ground transportation categories, all of which are expected to remain relatively flat or experience slight increases in the region. In response to more competition from a strengthening rail industry, which is expected to improve its business class options, larger airlines are expected to follow the model of low cost carriers.

Hotel rates are expected to increase in nearly all countries and categories in 2014, resulting in an overall prediction of increases in both mid-range and upper-range categories for EMEA. Germany, which boasts one of the stronger economies in the European Union, is also expected to see relatively higher increases in hotel prices in 2014.

Rail travel in Europe can be preferred by business travelers for intra-European trips. European car rental suppliers will likely adjust to price sensitivity and traveler needs by offering a number of alternatives to traditional daily car rentals, including car sharing options and introducing their lower cost rental brands.

Outside of Europe, airlines in the United Arab Emirates, which has maintained steady economic growth, are expected to add capacity and new global destinations, likely causing short- and long-haul business fare predictions to decline. Hotel prices are expected to rise in the United Arab Emirates, even with growing supply, as the region remains an attractive business destination. Although the United Arab Emirates continues to be a developing country for rental cars, rates are expected to increase due to communication campaigns and websites now in local languages.

Asia-Pacific (APAC) Predictions & Dynamics

Driven by China’s slower but stabilizing growth, APAC will likely see rate increases across most categories. Individual country predictions tend to be positive, as well; however, as is the case in other regions, considerable variability across the region is expected.

Hotel rates across the APAC region are expected to see rate increases, as the region continues to grow economically and supply is not expected to outstrip demand in most locations. The exception is India, which may experience slight declines.

Car rental prices are expected to increase slightly due to expected growth within the region. However, across APAC, chauffeurs and public transportation, including trains, will likely continue to be more popular and practical for local transportation in most cases.

From: American Express

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