Airfares predicted to follow hotel slowdown

Travel News 17 Nov 2016

Companies are budgeting for next year’s business travel expenses, and the good news is that prices for hotel rooms and air tickets will likely remain the same as they were in 2016.

The years of hotel rate increases and sky-high airfares could be over for global business travellers, according to Travel Leaders Group’s 2017 Industry Forecast.

Travel Leaders Group examined its transaction data, advance booking information, and knowledge of its global travel consultancy to crunch the numbers for its report.

Overall, prices are stagnant across air, hotel, and car rental segments, a result of global instability and the disruptive forces of low-cost carriers and sharing economy services.

“As a result of ongoing uncertainty and macro-economic projections, we believe that while overall 2017 global travel transactions will experience modest growth, that overall travel spend will be flat,” states the forecast.

“Pricing pressure is mounting in many major markets given an excess of supply and reduction in demand. As a result, while business travel activities will continue to expand, prices will remain largely stagnant across air, hotel, and car categories. [Travel providers] will work hard to increase prices but their efforts will be largely unsuccessful with the scale tipped more favourably to buyers. As long as energy prices remain low, modest demand continues and terrorism incidents are low, [travel providers] will continue to record robust profits from their activities.”

Travel Leaders projects the average domestic air ticket in 2017 will be priced at $410.21, the same as in 2016 but a major decrease from $444.26 in 2014. Low-cost carriers will likely limit fare raises from the U.S. big three carriers.

Regarding flights to and from Western Europe, likewise, the report projects a minor decrease in airfares due to the continued expansion of international low-cost carrier options.

Domestic hotel rates are slated to see a marginal increase next year, up to $154.69 from $153.16 in 2015. The forecast predicts that the increased use of services like Airbnb will slow the rise in global hotel rates in the years to come.