Cost of global business travel set to rise

As the world opens up to travel once again the associated costs for business travel are set to rise, according a new report.

The Global Business Travel Forecast, published by CWT and the Global Business Travel Association, forecasts that travel pricing across air, ground, and hotels is expected to increase in the next two years, primarily driven by increasing demand, capacity constraints, and travellers’ sustainability demands, in addition to increased labour and fuel costs.

“Business travel recovery is underway, and it is really great to see people reconnecting and engaging once again, as the world returns to a more traditional pace of life,” said CWT CEO Michelle McKinney Frymire.

“While the best-case scenario for 2022 is for further recovery of business travel across all areas, not all markets, nor all categories, will recover at the same pace, so business travel managers will need to understand what to expect as we look at the year ahead.”

The global economy is expected to grow 5.9 per cent in 2021, followed by 4.9 per cent in 2022, spelling growth for business travel. However, several uncertainties remain on the periphery that could influence the macroeconomic outlook and the global travel economy.

Macroeconomic forces, government policy, and Covid protocols will continue to impact future pricing more than ever before. As with previous industry interruptions, many travellers won’t return immediately, and the business traveller may find themselves in a price competition with the leisure traveler – who is leading the recovery and willing to pay higher prices on key city routes and destinations.

After rising 2.6 per cent in 2019 air fares fell 3.1 per cent in 2020 and a further 31 per cent for business travellers, led by a 38 per cent decline in premium class, followed by nearly a 19 per cent decline in economy class tickets across 2021. However, air fares are expected to rise 3.3 per cent in 2022, and 3.4 per cent in 2023.

Airline capacity remains tight and is unlikely to return to pre-pandemic levels until 2023, or 2024. As a result, business travellers are competing for limited capacity with leisure travellers. This will continue to exert pressure on airfare prices in 2022, as they move in unison with demand. If demand increases faster than capacity returns, price increases could outpace these forecasted increases.

Premium fares are expected to start picking-up in 2023 as demand normalises, while economy fares, especially on domestic routes, will continue to benefit from strong gains in leisure traffic going into 2022.

Domestic leisure destinations will continue to lead recovery in 2022, and, while urban centers with strong corporate traffic will take longer to recover, higher vaccination levels should strengthen business traveller confidence.

Hotel prices fell 8.3 per cent in 2020 and an additional 17.7 per cent in 2021, with prices as of Q3 2021 down from 2019 levels by around a quarter.

Although hotel prices are expected to rise 13 per cent globally in 2022, followed by a further 10 per cent in 2023, it will take some time for a return to 2019 levels in many markets. As borders open for non-essential travel, occupancy rates will rise, putting upwards pressure on pricing and 2022 will see a push in that direction.

Corporate meetings and events will also help impact hotel pricing, and CWT Meetings & Events anticipates that the bulk of immediate meeting bookings will be small and regional. Virtual and hybrid meetings played a leading role in 2021, while the overall meeting size of live meetings dropped from an average of 42 attendees per meeting in 2019 and 2020, to an average of 24 attendees in 2021.

Many organisations appear to be choosing smaller regional meetings, as opposed to larger events involving travel at the current time, however, as restrictions lift, and pent-up demand leads to more people travelling for meetings, that looks set to change in 2022. Demand for meetings and events has increased 53 per cent for the first half of 2022 from 2021.