Increased Leisure Travel Demand Could Lead to Fewer Business Trips

Airfares have been relatively flat in the domestic U.S. for the past few years, but a new report finds that prices are expected to creep upwards beginning in 2016.

Research from IBISWorld has found that the cost of airfare and hotel stays are likely to rise for business travelers in 2016. According to IBISWorld’s procurement research, hotel room rates are expected to rise by 4.3 percent annually through 2019 while airfares are slated to rise by 5 percent each year over the same period.

“Rising airline ticket prices in the coming years will force businesses to expand their corporate travel budgets or cut costs elsewhere,” IBISWorld analysts Michelle Hovanetz and Ashley Cruz told Skift. “Buyers may reduce the number of trips they take to protect their bottom line. Buyers that frequently book last-minute trips will suffer the most, as prices will rise even faster during the four weeks prior to departure.”

On the ground transportation front, prices are expected to continue to rise for both traditional taxi service and car rentals. Sharing economy services represent a huge opportunity for travelers and businesses to save money without cutting down on travel.

“The convenience of low-cost, on-demand transportation services at the touch of a button has boosted competition tremendously, providing buyers in many cities across the country with a viable alternative to traditional taxi services,” they said.

They don’t expect the sharing economy to have any transformative effect on the corporate travel space in the next few years, mainly due to the slow integration of roomsharing services like Airbnb into corporate travel policies.

“The sharing economy will not have a very strong impact on accommodations for business travelers, though,” they said. “Services like Airbnb offer cheaper alternatives to hotels, but do not offer the same level of service or reliability as hotels. As a result, Airbnb-type services might be appropriate for consumers seeking lower rates, but they are not typically suitable for executives and other business travelers requiring full service accommodations. As such, demand for hotels is expected to remain elevated among business buyers in the coming years.”