Boarders have reopened and travel is back. But ever since its restart post the pandemic lock-downs this year, we have seen air fares, hotel rates, car rentals and almost every other travel related service go up. Reasons range from rising fuel costs to sudden increase demand now that travel restrictions and testing requirements have eased. We have seen aviation fuel prices more than double in some markets, while on the other hand the industry continue to struggle finding trained personnel to meet the growing demand amid rising inflation and other economic challenges.
The recent annual forecast from Global Business Travel Association (GBTA) and the travel management company CWT predicts travel prices to continue rising for the rest of 2022 and throughout 2023. Although the report mentions several factors which could impact its predictions such as higher inflation rates, impact of the Ukraine war, and the risk of further Covid-19 outbreaks, the strong demand for air travel and related services will be driving the price increase for at least the next 18 months. Staff shortages, rising raw material prices, and greater awareness for responsible travel are all having an impact on services, but all things considered, the predicted pricing is on par with 2019 figures.
What the Forecasts Tell Us
The report mentions airfare actuals at 12% and 26% during the pandemic years, 2020 and 2021 respectively, and its forecasts show 48.5% for the current year 2022 and a 8.45% for 2023 the prime factors being fuel prices and staff shortages. For the hotel sector the actuals for the same period were 13.3% (2020) and 9.5% (2021), and it’s expected to to double this year (18.5%) before coming down to a 8.2% increase in 2023. Ground transportation is less drastic, with forecasts of 7.3% and 6.8% for 2022 and 2023 respectively compared to the actuals 4.9% (in 2020) and 5.1% (in 2021).
For air travel, the increasing demand for travel now that borders have reopened, alongside the rising costs of aviation fuel which has more than doubled in some markets to over USD 160 per barrel is causing a spill over to the ticket prices for travelers. And then there are other trends at play on the other end, like the adoption of low-cost carriers in the recent years. For example, in the US only 4% flew low-cost during the last oil crisis (2008) compared to over 15% now. This adoption has gone up among the corporate travelers as well.
After two years of decrease during the pandemic, hotel rates are now reflecting an upward trend. In some areas around the globe, they have already surpassed 2019 levels; this year. Europe is set to see an uneven recovery in hotel rates. In United Kingdom, for example, the rates are expected to rise 31.8% in 2022, greater than 2019. Due to economic problems that have arisen as a result of the Ukraine invasion, European countries like Germany and France aren’t likely to see hotel rates increase from 2019. The United States and Canada’s hotel demand has been strong in 2022, according to the report, moving past 2019 levels in various markets. Prices are expected to rise 22% percent in 2022 and 11% in 2023.
Supply chain disruptions have affected the global car rental industry greatly, causing a slowdown in auto production. Rental companies reduced fleet sizes as a response to the slowed demand during the pandemic and have yet to fully recover. Although these companies have moved to buying used vehicles to supplement their shortage, in addition to keeping cars longer, global rental prices are still expected to increase. Global climate initiatives like the EU ban on combustion engine cars by 2035, will play a huge role on rental agencies’ adoption of EVs, although there still are challenges such as the charging time for empty EVs that causes delays on getting back for the next trip.
In the meetings arena, the per-attendee cost this year (2022) is expected to increase by roughly 25%, as compared to 2019. Much like the slowdown mentioned in the aforementioned sectors, 2023 will see a smaller increase of 7%. The report points to pent-up meeting demand, the desire to build company culture, and the insecure economic outlook as culprits behind this increase, as well as the fact that many corporate events were moved from 2021 to 2022, resulting in more demand than usual this year.
Tips for Dealing with the Change
As we have seen, the remainder of 2022 is predicted to see the greatest price increase across air fare, ground transportation and hotel rates. This growth is expected to slow in 2023, with the most decrease seen in air fare. Hotels and car rentals are set to see less dramatic drops. Here are some tips that you can use to stay ahead of the game:
- Booking early is the best bet when it comes to the airlines in the current scenario. Fares are always higher closer to the date, especially during high season. Same is true for most other services like hotels and meetings as well.
- Go for lower air fares when traveling for confirmed business events, conventions, etc. But consider flexibility for changes and cancelations when it comes to business trips for meetings and others that might have a possibility of getting canceled of rescheduled.
- Always consider the fare details and be careful to avoid unnecessary fees and charges such as flight cancelation and no-show charges that can turn an otherwise budget trip into a significant business expense.
- Watch for deals. Ask you agent for special or ad-hoc fares and rates that airlines and other suppliers offer from time to time.
- You can also consider regional airports as alternatives to usual entry points. Very often there cheaper tickets to second-tier airport nearby that are about the same distance as the major airports.
- Being aware of suppliers that offer last minute deals and price drops can help when you have travel requirements that came up without much notice.
- Leverage group fares and group booking discounts offered by airlines and hotels. Travel products being highly perishable, suppliers are usually ready to part a bit of their earning to ensure that they reduce the risk.
- Pull out those supplier reports and find your frequently used suppliers. Negotiate with them for corporate deals and special discounts.
- You can consider alternatives to conventional hotel accommodations, like serviced apartments for longer stays, for group trips, etc.
- When booking accommodations, look for those close to the place of business. This could save you money you may need to spend car rentals, transfers and ride-shares.
- Instead of booking car transfers with established vendors, advise travelers to consider using ride-share apps like Uber, Careem and Lyft where possible and safe. Expenses can be reimbursed to the employee.
- Get frequent travelers loyalty/reward cards with suppliers that they use more often. Frequent travelers may also consider travel cards that let them earn points for travel and related expenses and provide other benefits like lounge access or upgrade.
- Negotiate to get some value adds or upgrades thrown in, especially when you can’t get discounts or special fares/rates from your agents or suppliers.
From considering low-cost airlines to taking trains and getting travel passes, there are plenty of other way to save of corporate travel. Not all of them work for every business and business traveler, but being aware and open to these possibilities help in controlling the travel spend.
Corporate travel costs are on the rise for the next couple of years at least, but as long as you plan accordingly and have the right tools and strategies in place, there’s no reason for business trips to hurt your bottom line. In fact, business trips are an excellent way to increase revenue as they create new opportunities and enable better service deliveries. I hope these tips will help you get better value from your travel spends and positively impact your business in the new post-pandemic world.
