Increased Costs Will Put Pressure on Business Travel Growth

Business travel has been on an unprecedented growth trajectory in recent years, driven by emerging markets and modest growth in North America and Europe.

In the coming years, however, a variety of headwinds will move to stifle growth, according to a new forecast from Carlson Wagonlit Travel. A lack of hotel supply will increase costs for travelers in Asia, while uncertainty surrounding Brexit will likely reduce both consumer and traveler spending in Europe.

The company expects global growth in gross national product to rise to 3.4 percent in 2019, followed by a decline to pre-2017 levels in 2020. This decline will be driven primarily by a large drop in growth for North America, Western Europe, and Japan.

There is also the matter of the nascent trade war between the U.S. and its trading partners, particularly China and the European Union. The value of the U.S. dollar is expected to drop, making it more costly for U.S. companies to travel for business.

“One of the key risks to global economic recovery is the rise of protectionist policies and stoking trade wars,” states the report. “Global trade has finally recovered to near pre-2008 levels, and is a key driver of corporate travel, so any policy aimed at protectionism, or reducing the level of global trade and cooperation, will have a detrimental impact on the demand for global business travel.”

Here is a look at the projections for region airfare pricing in 2019.

Source: Carlson Wagonlit Travel

In Asia-Pacific, every major country will see airfares rise except Japan, which is expected a 3.9 percent decline in prices due to a stronger yen. There are also a variety of issues affecting the global aviation industry, like the increased price of oil and widespread labor issues, that will contribute to driving airfares higher. Turning to ancillaries to drive revenue will also drive up costs for business travel at large.

Global hotel pricing follows a similar pattern.

Source: Carlson Wagonlit Travel

“As pressure increases on accommodation providers, corporate travel buyers will face challenges in their ability to secure rooms at their preferred properties, much less at their preferred rates,” notes the report. This will, in turn, increase the need for travel buyers to use automated tools to make sure they’re receiving lower rates.