Skift Take

Companies shouldn't underestimate the knock-on effect of this year's labor crisis, and this new report is a timely heads-up to help them better manage their costs next year.

Companies should prepare for much higher hotel rates next year, as the labor crisis and other macroeconomic factors unfold into 2022.

A new report has warned that prices will rise by 13 percent in 2022, significantly outgunning inflation.

The International Monetary Fund forecasts advanced economies will see inflation of about 2 percent by mid-2022, while the Organisation for Economic Co-operation and Development expects the G20 countries to have a rate of 3.5 percent by the end of 2022.

However, the warning — which appears in the annual Global Business Travel Forecast, published on Wednesday — points to lower upticks in air fares and ground transportation costs, at 3.3 percent and 3.9 percent respectively.

Supply Constraints

The accommodation sector is set to be hit by several factors, including the availability of labor, the report says. Its publication comes just weeks after CEOs of the world’s largest hotel groups said this is a problem that isn’t going away anytime soon.

And as business travel returns, occupancy rates will rise further for top-end properties. “Upscale hotels should see higher occupancy levels, and higher room rates, as business travel, and corporate meetings and events, will also impact hotel pricing,” said Richard Johnson, senior director, solutions group at travel agency CWT, which published the report alongside the Global Business Travel Association.

Supply chain issues, increased operational costs and staff shortages are also hitting the meetings sector, according to a survey by the UK’s Meetings Industry Association.

“Ninety percent of venues have reported increased operational costs, with over half highlighting ‘substantial increases.’ This includes rises as high as 10 percent in food and beverage, energy, salary, and recruitment costs, with most forecasting further increases over the next quarter,” the association said.

The Only Way Is Up

Companies shouldn’t be too shocked by the inflation-busting price hikes, as the report points out that after hotel rates increased by 3.5 percent in 2019, they plummeted over the next two years, falling 8.3 percent in 2020 and 17.7 percent in 2021.

However, after the 13 percent boost in 2022, they are expected to go up by just 10 percent in 2023.

Air fares, meanwhile, have their own catching up to do. They’re set to rise 3.3 percent in 2022, and 3.4 percent in 2023. During the pandemic the average ticket price fell 3.1 percent (in 2020) while business-class seats dropped 31 percent, and premium class nose-dived 38 percent. In 2021, economy-class tickets declined just 19 percent.

Global car rental prices fell 2 percent in 2020 and recovered 1.2 percent in 2021. Pricing is expected to increase 3.9 percent in 2022, and an additional 3.0 percent in 2023, although this may be dampened by business travelers switching to greener modes of travel, such as trains.

What Can Travel Buyers Do?

According to CWT’s Johnson, the reason for the report, published to coincide with the Global Business Travel Association Convention, is to give travel buyers the right information to reflect on how they govern their program or travel policy.

For example, if there’s a shortage of supply around the corner, it gives them a chance to look at alternatives. Moreover, companies may be less price sensitive if they’re buying something that aligns with the wider organization’s sustainability goals.

“Travel managers also need to understand who is currently traveling with the business, versus who needs to travel in the future,” Johnson said. “Maybe travel less, but for longer, or at different times. They need to think of total cost of trip, rather than about one single component of it. Also think about the class of travel, and work with suppliers. They don’t have to wait until the request for proposal process.”

The Global Business Travel Forecast uses anonymized data generated by CWT and the association, with publicly available industry information, and econometric and statistical modelling developed by the Avrio Institute.

“As we turn toward recovery, insights and data will be critical to enable the business travel industry to navigate what will likely be a dynamic year ahead,” said Suzanne Neufang, CEO of the Global Business Travel Association.

“This forecast is designed to help corporate travel buyers build and budget their 2022 travel programs through an informed summary of how the global pandemic influenced pricing in 2021, along with a detailed look at macroeconomic factors that will affect pricing in 2022,” she added.

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Tags: accommodations, coronavirus, corporate travel, corporate travel management, cwt, gbta, hotels, rates, travel management

Photo credit: The accommodation sector is set to be hit by several factors, including the availability of labor, in 2022. Carlos de Almeida / Unsplash

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