American Express Publishes Global Business Travel Forecast 2018

The outlook for international business travel is generally optimistic, according to the Global Business Travel Forecast 2018 published by American Express Global Business Travel (GBT).

Demand for business travel started to rebound last year, and is expected to grow over the next 12 months, with some notable gains expected in Europe and Asia. China and India’s high-powered economies once again lead the way. However, prices will see only marginal gains, as suppliers rapidly increase capacity to meet demand as they compete for market share.

Despite the recent economic progress made in many global marketplaces, an element of caution remains in some quarters. Geopolitical instability combined with moves by some governments towards more protectionist economic policies has generated an undercurrent of uncertainty in the business community.

Global Highlights

Air: While strong demand is expected to drive airfare increases across all regions, overcapacity on certain routes, aggressive expansion by low-cost carriers (LCCs), and low oil prices will keep them in check. Full-service carriers are increasingly unbundling fares and adding premium economy seating options to entice consumers to better compete with LCCs.

Hotel: Hotel performance is expected to improve globally, with small to moderate rate increases driven by strengthening regional economies, despite robust investment in new hotel supply. Total costs, however, should increase even further as additional ancillary fees and stricter cancellation policies are applied by many hotels looking to bolster profitability.

Ground: After years of flat or negative growth, rental car rates should finally see increases as companies improve their fleet management while operating costs put pressure on pricing. However, competition will remain fierce. In the absence of significant rate increases, car rental companies are once again turning to ancillary services and fees to drive greater profitability.

Jo Sully, Vice President & General Manager, American Express Global Business Travel, Australia & New Zealand, said “Modest increases in fares across air travel and hotel are expected across Asia-Pacific as a result of renewed business confidence within the region, driven largely by the influence of China and India. Despite positive economic conditions, companies continue to seek cost savings in travel, and we anticipate continued scrutiny in areas such as trip length, moving bookings online, hotel consolidation, and advanced bookings.”

APAC

Strong growing economies across much of the Asia-Pacific region and a burgeoning middle-class are causing demand for travel to surge. However, China remains a key driver of this growth and a slowdown of its economy could have a ripple effect throughout the region.

Airfares will remain relatively stable compared to 2017, as political stability and strong demand in China and India, is counterbalanced by widespread overcapacity and flatter demand in Japan and Australia.

Domestic carriers in China will also have to compete with the world’s fast-developing high-speed rail network, which accounts for more than two-thirds of the world’s capacity and is expected to grow another 50% by 2020.

Hotel rates in the region will generally increase as growing business confidence and a thriving tourism sector drive up demand, although this will vary considerably by country. South Korea is the only nation expected to see rate decreases, largely as a result of China’s tourism ban. 

Americas

In North America, U.S. foreign policy will loom large in 2018, as foreign trade agreements are renegotiated, potentially impacting international demand for travel.

Already facing weakening demand and overcapacity on some international routes, U.S. carriers are re-prioritizing domestic operations, with additional connections to secondary, smaller destinations.

The direct competition with LCCs will help keep fare increases modest next year. In Latin America, airfares should see slight increases thanks to regulatory changes and increasing demand along international routes.

U.S. hoteliers will contend with decreases in foreign travelers and overcapacity in many major cities, with rates only expected to increase up to three percent on average over last year. However, this will vary significantly by location and some areas, like Silicon Valley, will continue to see rates climb.

Canada will benefit from this uncertainty, with demand - particularly from U.S. visitors - largely outpacing supply in key locations such as Vancouver, Montreal and Toronto, resulting in high single-digit rate increases.

Hotel rates in Latin America will remain generally flat in 2018, although Argentina and Peru will see significant increases due to promising economic activity.

Ground transportation in North America will still struggle in 2018, but can expect slight rate increases for the first time in years. Despite fierce competition amongst rental car suppliers, improved fleet controls and mounting cost pressures will help push rates higher, especially amongst smaller clients.

Ride-sharing services like Uber and Lyft will continue to have limited impact on car rental demand, providing complementary service better suited to short trips and urban locations. However, their focus on convenience and mobile technology are pushing suppliers to focus on travel experience improvements.

Latin America can also expect slight ground rate increases, due to economic growth and despite low-cost supplier competition.

EMEA

In Europe, the U.K.’s decision to withdraw from the European Union (EU) – known colloquially as Brexit – could impact travel throughout the region as carrier operations and passenger demand potentially shift.

British carriers will see airfares remain flat, while air and rail suppliers servicing the region will look to the state of Brexit negotiations to determine how their operations could be affected as border control and air traffic rights are redefined ahead of the 2019 deadline.

In Europe notable increases in hotel rates are expected, except for the U.K. and Spain, with hotels across the region seeing growth in demand driven by tourism, which has outpaced limited increases in new supply.

Ground transportation has benefited from increased demand as well with rental car demand expected to grow slightly. However, aggressive competition between rental car suppliers, as well as millennial shifts towards ridesharing and public transportation, will keep prices relatively flat.

The full Global Business Travel Forecast 2018, published by American Express Global Business Travel, can be downloaded in .pdf format, after filling in a few details, here.

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