Skift Take

It’s the first time that prices are cooling off this year, but experts warn this deflation won’t last long with more “correction cycles” to come.

Travel prices across Europe have started to decline, following months of continuous hikes in air fares and hotel rates. However, they’re expected to remain highly volatile for several years as the market undergoes a correction.

New data from Spanish corporate travel agency TravelPerk shows travel costs have come down for the first time in 2022, catching up with a travel deflation seen in the U.S. in the third quarter.

The data, which also includes rail prices, covers the fourth quarter so far. And for those two months of October and November, global travel inflation now stands at -8 percent compared to the third quarter, according to the agency.

Tripbam, an auditing and re-booking platform, sees similar trends.

“Seasonality has a big impact on the data,” said Steve Reynolds, CEO and founder. “We always see rates and fares decline between now and year-end as business travel declines and then returns in January, with a steady climb through June.”

UK Takes the Biggest Hit

Vic Pynn, CEO of procurement platform Vindow, said travel buyers and corporate travel management were now more cautious about long-term commitments.

“We expect to see more rate volatility in the coming 12-18 months as all travel segments continue to normalize,” he said. 

For example, Travelperk’s data has highlighted marked decreases in the UK. Of the routes with the top 10 highest price drops across Europe, nine are to or from London. This follows a peak in prices in the third quarter when UK flights were 96 percent more expensive than a year before.

Overall, European flights decreased in price by 11 percent, but London flights saw the highest price drops of up to 38 percent over the quarter for the Munich route. Air fares to Budapest have fallen 29 percent.

However, Tripbam’s Reynolds said now was the best time for company travel managers to negotiate discounts, because prices will continue to decline this month. “It’s easier to get the static rate you want while rates are down and dropping,” he said.

He added there will be a significant “bounce up” in January that will continue through the summer.

“The key question is what will be the average fare or rate starting in early January,” Reynolds added. “My view is it will be 5 percent higher than it was in 2019 and stay around that level through mid-year.”

Cooling Off

European accommodation dipped an average of 7 percent, quarter-over-quarter, with Spain seeing the steepest decline at 10 percent. However, city wise, Portugal’s Lisbon and Finland’s Helsinki bucked the trend. Hotel prices rose 10 percent and 8 percent respectively, but probably because they hosted major technology conferences, Web Summit and Slush, in November, said TravelPerk.

But the deflation was a “very welcome cooling off after the summer peak,” according to JC Taunay Bucalo, chief revenue officer at TravelPerk.

Yet still prices remain above 2021 levels.

“It’s clear that demand remains high among business travelers, despite the price increases, but we do expect to see changes in booking patterns as employers and individuals adapt,” he said. “For instance, by building in some flexibility to their travel plans and embracing emerging business hub destinations, companies can maximize value for money while still bringing teams together for key moments.”

The former chief of the Global Business Travel Association said travel buyers and suppliers needed to understand that short-term volatility and adjustments are now the norm

“We can expect many short-term corrections in the supply and demand curve, and this latest one is just one of many we will experience,” said Mike McCormick, who is now executive vice president at Onriva, a business travel marketplace. “In fact, my prediction is that we will have an unprecedented number of these types of short-term price corrections in the next few years.”

Both buyers and suppliers need to allow for flexibility in contracts and approach to pricing, for example by allowing dynamic pricing “triggers” where prices can be pegged, he added.

Tags: business travel, corporate travel, inflation, london, New York, pricing, transatlantic, travel management, travelperk

Photo credit: Hotel Terminal Neige, Flaine, France Judith Girard-Marczak / Unsplash

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