Even with slower gains, prices are still high, and corporate buyers will need to plan ahead.
The cost of business travel increased much more than expected in 2022, a new report from corporate travel agency CWT and the Global Business Travel Association (GBTA) shows.
“Rising fuel prices, labor shortages, and supply chain challenges, coupled with red hot demand, caused travel prices to skyrocket in 2022,” CWT and GBTA said in a statement announcing the report.
In 2021, CWT and the GBTA predicted 2022 air fares would rise a mere 3.4%, but that was before the Russian invasion of Ukraine significantly boosted estimates.
The average ticket price for business-related airfares actually rose 72% to $749 in 2022, CWT reported in its most recent findings. The travel agency previously had estimated a 48.5% increase.
The Europe, Middle East, and Africa (EMEA) region had the highest average ticket prices for business air travel: $855. In North America, average ticket prices were $758.
- The average daily hotel rate for business travel rose nearly 30% to $161.
- The daily cost for a person to attend business meetings and events rose significantly – by 58% to $160.
- Daily rental rates for cars increased 9.8% to $45.
Richard Johnson, global head of CWT’s Solutions Group, told Skift that several prolonged challenges during the end of 2022 and early 2023 created a situation where business travel prices increased more than expected. These included labor and raw materials shortages, high energy costs and a scenario where pent-up leisure travel demand was competing for resources with business travel.
Prices Are Still Rising, But More Slowly
While it’s hard to know for sure how much prices will increase in any given year, 2023’s estimated price increases are significantly lower.
“Lingering economic uncertainty and a gradual easing of supply-side constraints are expected to result in more subdued price increases over the next 12-18 months,” the report stated.
Even so, prices are still high. CWT’s report expects average air ticket prices to rise only 2.3% this year, and to taper off to 1.8% in 2024.
Airlines have been raising prices for flights in light of pent-up leisure demand, the report said, adding that corporate buyers have less leverage because their travel volumes have not surpassed pre-pandemic levels.
Daily hotel prices are expected to rise 4.3% in 2023, and 3.6% in 2024. Meeting costs are expected to rise by 5.6% this year, and 3% in 2024.
CWT is not expecting such dramatic increases in 2023 because last year’s price increases largely reflected a sector recovering from the pandemic.
“Some of the supply chain challenges have started to ease,” Johnson said, referring to aircraft delivery delays and semiconductor shortages in the automotive industry. A slowing global economy also means that competition for inventory between business and leisure travel could ease as travelers become more cost-conscious, he said.
Continued High Costs For Meetings
Corporate buyers should see high costs continue for meetings and events as the new norm, instead of expecting prices to ease back to 2019 levels.
The average cost per meeting attendee is expected to increase from $161 to $174 by 2024, the report shows. Food and beverage costs are also expected to rise.
Lead times are still short for the rebounding meetings and events sector, so CWT suggests that buyers should plan a year out to ensure reasonable prices. Meanwhile, event planners are increasingly deciding how to balance costs with sustainability and environmental, social, and governance (ESG) criteria.
“What we found is that there really hasn’t yet been a full mindset change to understand the fact that the whole travel supply chain that feeds into meetings and events has raised prices significantly,” Johnson said. This goes beyond just hotel room price to the cost of food and beverages, transportation, labor and other areas.
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Photo credit: A business traveler about to catch a flight Pxfuel