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Hotel rates are going up in top business markets in 2013, but airfares are expect to rise at an even faster clip.
That’s the word from Egencia, Expedia Inc.’s corporate travel arm, in its recently released Global Corporate Travel Forecast for 2013. Egencia projects that average airfares in major business travel markets in 2013 will rise 5% in North America, 3% in Europe, and 5% in Asia-Pacific.
Egencia notes airfares next year will be “slightly up,” but these increases in airline ticket prices in 2013 would be substantial when measured against more modest projections for increases in hotels’ average daily rates in cities that attract lots of business travelers. In fact, Engencia forecasts that hotel ADRs in key business travel markets in 2013 would edge up just 3% in North America, 2% in Europe, and 1% in Asia-Pacific.
The trends are important because corporations of al types are setting their travel and expense budgets for next year, and are gearing up for rate negotiations with airlines and hotels.
Bright spots in San Francisco and Boston
But, if hotels’ ADR increases in North America as a whole are expected to be tepid next year, don’t tell that to hoteliers and their business-traveler guests in San Francisco and Boston, where ADRs are projected to rise 12% and 8%, respectively.
“San Francisco’s booming economy has meant increasing demand for rooms,” Egencia states. “With no new supply added in 2012, and freshly renovated product at key hotels, hoteliers will not see much resistance to aggressive pricing.”
Meanwhile, with supply expected to be fairly flat in Boston next year, healthy occupancy rates there will assist the city’s hotels in boosting corporate rates 8%, Egencia projects.
Consolidation means clout for the dwindling number of large U.S. airlines
The relative muscle airlines will have in raising corporate rates for airfares in North America stems, in part, from industry consolidation (Delta-Northwest, United-Continental, and Southwest-AirTran), as well as their management of capacity demand, Egencia states.
Another contributing factor to the projected global rise in airfares in 2013 is the emergence of strong carriers in the Middle East.
“In large part we found down in the data that the entrance into new cities of the Middle Eastern carriers like Emirates, Qatar, Etihad, and the Asian carriers like Cathay and Qantas have provided a very high-class product that other more traditional carriers have been forced to emulate,” says Guy Weismantel, Egencia’s vice president of global marketing. “This has actually help set pricing strongly in key business markets where there is multi-carrier competition.”
On the hotel front in North America, chains will be able to boost corporate rates in 2013 — albeit with smaller increases than airlines can muster — because occupancy rates are strong, and there is little new supply, and this all comes about despite the fact that economic uncertainty persists, according to the Egencia data.
This all amounts to a challenging environment for airlines and, to a greater extent, hotels in 2013, although corporations may be able to take advantage of some of these market dynamics.
Here’s the Egencia 2013 forecast in full: