State of the industry: Business travel trends every travel manager should know about

TRANSCRIPT

Chad Lemon: Hey, hey. Welcome back to Connections everyone. I’m your host, Chad Lemon.

Miriam Moscovici: And I’m your co-host Miriam Moscovici. Now, you know the drill. Connect with us by heading to bcdtravel.com/podcast, or send us a text via the podcast platform you’re listening to right now.

Chad: Can you believe it’s already June, and we’re halfway done with 2025 Miriam?

Miriam: No, I can’t. But if it’s the halfway point of the year, that can only mean one thing on this pod, right, Chad?

Chad: That’s right. It’s time for the ever popular State of the Industry episode with resident expert Rossana Martin. Rossana has kind of become this go-to expert on these State of the Industry episodes and somehow crams everything that a travel manager needs to know into a 20-minute pod episode. I know I love them.

Miriam: I don’t know how she does it, but I’m eager for what she has for us on this episode. So let’s do it.

Chad: Welcome back, Rossana. How many episodes does this make for you now?

Rossana: Well, Chad, I think this might be my sixth podcast.

Chad: I think you’re in the lead for most episodes by a guest. But before we dig in, I’m not sure that we’ve ever even asked you about you. Can you just tell our listeners a little bit about yourself, and how you’ve kind of become our go-to resident expert?

Rossana: Well, I never wanted to admit this, Chad, but since I just had a birthday, I’ll just say it.

Chad: Say happy birthday.

Rossana: Thank you. I just celebrated 35 years in the travel industry, and I’ve always been on the TMC side. In my current role as a global sales leader, I manage a team of individual sales contributors who collaborate with our global clients to help them travel smart and achieve more in their corporate travel programs.

What I think I’m most proud of, though, is our approach to selling. We don’t employ a hard-selling approach, and we approach the sales process as consultants. And to do this, it’s important that our entire sales team has our eyes and ears open to what’s going on in the industry today, as well as what might happen in the future. And our team doesn’t do this on our own. We have a lot of help from our consulting arm at Advito and our Research & Intelligence teams. These teams quite simply publish the most industry thought leadership in the business, and they are the true rock stars.

Miriam: All right, Rossana, we all know that these State of the Industry episodes are some of our most popular with travel managers. So I say we just use our usual framework. Let’s start with the general observations across global business travel. So what are you noticing?

Rossana: Well, let’s start with the Israel/Iran Conflict. Airlines are canceling flights to Tel Aviv and diverting routes around Middle Eastern airspace following Israel’s attacks on Iran. Iran, Israel, Iraq, and Jordan have all shut their airspace, grounding planes and disrupting key east-to-west flight corridors. And as of Friday, June 13, at least 1,800 flights to and from Europe had been disrupted as a result, including approximately 650 canceled flights. That’s according to Reuters.

Now let’s talk a little bit about how U.S. policies are weighing on the economic and travel outlook. I think we’re all aware that earlier this year the U.S. government began pursuing actions that have potential implications for business travel. Policies already implemented or talked about by the Trump administration in the U.S. have created a lot of uncertainty. This includes imposing significant tariffs on imported products, U.S. entry restrictions for travelers to the U.S. from specific countries. I’ll talk a little bit more about that later. Cross border policies and decreased business travel for federal employees. Any one of these developments could dampen business travel.

We saw a substantial escalation that occurred with the widespread introduction of tariffs on April 2, or called Liberation Day, as the Trump administration has called it. Some of the key developments and messages so far; the outlook for the U.S. and global economies was downgraded even before the announcement of Liberation Day, and Oxford Economics subsequently made a steeper downgrade in its economic forecast released on April 15.

Events in April in particular are also potentially weighing on the outlook for business travel spending in the U.S. And the prospects for global travel have similarly been downgraded, with North America the region most negatively impacted. And having been expected to grow by 9% for the second consecutive year, in 2025, tourism economics expects inbound travel to the U.S. to contract by 9% instead, with arrivals from Canada the most impacted. And airlines are starting to record the most impact on their finances and how they’re likely to respond, which could affect the corporate traveler.

Let’s talk a little bit more about travel bans, too. On June 4, I think we’re all aware here that the U.S. government issued a presidential proclamation reinstating and expanding travel bans effective June 9 of this year. It blocks entry for nationals of 19 countries divided into two groups; 12 countries with full entry bans and seven countries with partial visa restrictions. Now, there is rumors that that could expand to 36 countries. This move was justified on the grounds of national security, citing terrorism concerns, inadequate vetting in these countries, and high visa over state rates.

Chad: My favorite part of these episodes is when you take us around the world and give us insights into what’s happening in each major region. Do you want to start with maybe Asia Pacific?

Rossana: Sure, Chad. Some important notes. I’m basing this information off of the Advito’s Q2 2025 Travel Price Index. And the data I’m sharing is based on travel originating from these regions. And when I mentioned quarter-over-quarter stats, I’m referring to Q1 versus Q2 2025. And it’s possible to have a positive variance and a negative trend and vice versa.

Just one general air note I want to share. The International Air Transport Association, or IATA, expects total airline industry revenue to surpass a trillion for the first time this year. Although the 4.4% year-over-year rise will represent a slowdown from 2024’s growth, which was 6.2%.

All right, so let’s start with air and APAC. Looking at intercontinental routes for the region year-over-year, business class airfares were up 3%, and economy fares are up 4%. Now, quarter-over-quarter business class is trending upward, and economy fares were flat. And geopolitical tensions have some influence and the network of European carriers from Asia have been massively reduced. The frequency of flights from China to the U.S. have also significantly dropped. Reduced capacity paired with high demand are what are driving these fares upward.

Now, taking a look at domestic and regional routes. Year-over-year, business class fares are up 1%, but economy fares are down 7%. Yea, isn’t that crazy? It’s an interesting trend. And quarter-over-quarter, both are trending down. And the booming India market and strong capacity growth in China and Japan are leading to lower inventory fares than last year.

I’ll also talk about rail in markets where it’s appropriate. So for Asia particularly, overall rail fares in China and Japan are up 1% year-over-year. We’re seeing that rail fares in China are now stabilizing. And during this time last year, rail fares in China had increased by over 20% to address rising costs and heavy debts from the construction of the high-speed rail system two years ago. And rail fares in Japan are slightly trending upward, following a significant regulatory raise last year.

And let’s talk about hotels. So just a global hotel note in general. We do expect the easing of leisure and business travel demand will drive more moderate cost increases as we move into the second half of 2025.

Particularly for Asia, overall in the region, rates are up 1% year-over-year, but quarter-over-quarter we’ve seen hotel rates remain flat. Japan, India, Thailand, and Hong Kong and Malaysia are showing strong increases year-over-year, in BAR, what we call best available rate, compared to 2024. And most markets in Asia have increased 2025 occupancy to date, with the exception of China.

Looking at Southwestern Pacific Air and intercontinental routes, business and economy fares are both up 1% year-over-year. Quarter-over-quarter both are trending down, and intercontinental fares are stabilizing with a slight fare increase to most markets, and traffic continues to climb at a fast pace from Australia and New Zealand to intercontinental destinations.

For domestic and regional routes in Southwestern Pacific, year-over-year business fares are up 4%, and economy fares are up 5%. Quarter-over-quarter both are trending up, and domestic and regional fares are up thanks to contracting capacity mixed with high demand there as well.

On the Southwestern Pacific hotel front, overall rates are down 1% year-over-year. Quarter-over-quarter hotel rates are trending down regionally. There are mixed results in this region in BAR year-over-year. And we’re seeing BAR increases in Australia and New Zealand markets coming from Sydney, Brisbane, Hobart, Wanaka, and Queenstown. And other Southwest specific markets with increases include Suba and Apia, and most markets in the Southwestern Pacific have increased 2025 occupancy levels to date.

Miriam: Okay, well, how about the Middle East and Africa, Rossana?

Rossana: All right, let’s start with the Middle East, Miriam. So intercontinental routes, business and economy fares are up 3% year-over-year. Quarter-over-quarter business fares are flat, and economy fares are trending down. Intercontinental fares to all regions are up from last year. Strong capacity discipline, limited expansion, and dynamic customer demand are putting pressure on fares.

On the domestic and regional routes, business and economy fares are up 2% year-over-year. Quarter-over-quarter both business and economy fares are trending up, and gulf carriers are taking advantage of the reduction of operations from European carriers and the boom of the Indian market. As a result, fares from the Middle East are increasing with this new demand.

On the hotel front, Middle Eastern markets have shown mixed results in BAR year-over-year and quarter-over-quarter. Overall rates have seen no change year-over-year, but quarter-over-quarter we’re seeing them trend down. There are still some strong BAR increases in Abu Dhabi, Madina, Ramat Gan, Kuwait City and Erbil. And most markets in the Middle East have increased 2025 occupancy levels to date, except for Qatar.

And then, for Africa, overall, airfares from Africa to almost all regions worldwide are increasing year-over-year. Africa is the region that we’re seeing with the highest capacity growth. It’s 7% up versus 2024.

Miriam: Wow.

Rossana: Yeah, it’s crazy there too. And load factors are increasing leading to fare increases, particularly to Europe, the Middle East and North America.

On the intercontinental routes, year-over-year, business fares are up 4%, and economy fares are up 3%, but quarter-over-quarter both are trending down. So that could be good. On the domestic and regional route perspective, so year-over-year, business fares are up 2%, economy are up 1%, and quarter-over-quarter business class is trending down, and economy fares are flat. So again, maybe that will be a great trend.

On the Africa hotel front, we’re seeing most markets in Africa that are still seeing very strong to moderate increases in BAR year-over-year and quarter-over-quarter. Africa hotel rates have increased overall 5% year-over-year, but quarter-over-quarter are trending down. And markets with substantial rate increases include Cape Town, Johannesburg, Sandton, Asara, and along with markets in Kenya, Namibia, Nigeria, Uganda, and Zambia. And 2025 occupancy level in African markets have increased to date except for Kenya, Nigeria, and Tunisia.

Chad: And what about Europe?

Rossana: All right, so on the air front, intercontinental routes business and economy fares are both up 4% year-over-year, and quarter-over-quarter we’re still seeing a trend up. Intercontinental fares are going up for travel from Europe to all regions, and demand is strong, especially between Europe and North America. Capacity constraints are due to industry challenges. For example, 10% of inactive fleet are out for maintenance and repair, and geopolitical reasons. So Europe and Asia operations are impacted by the Russian airspace ban. And some key European carrier groups are introducing new surcharges from their home markets, which have inflated base prices and led to fare increases.

Domestic and regional routes business fares are down 1%, and economy fares are up 4% year-over-year. Quarter-over-quarter we’re seeing business fares flat and economy fares trending up. And domestic and regional fares are rising in the economy cabin, which accounts for most air traffic in Europe, and a reduction in domestic capacity to key countries, Germany, France, and the UK is primarily driven by the development of high-speed rail.

So let’s shift a little bit to rail. So overall rates in the region are up 4% year-over-year. Rail fares are showing a significant upward trend, particularly for UK and Benelux countries. And we’re seeing a more moderate trend in Southern Europe. And actions taken for more sustainable travel has strengthened rail demand in the region. I think many corporates are making concerted efforts to shift travelers off planes and onto trains for short-haul journeys.

The attraction for high-speed rail, though, is leading to a sharp increase in fares on top international routes, particularly London to Paris and Brussels to London. With air fares remaining the cheaper option here. There’s a growing interest in corporate carbon budgets to take into account the sustainability factor.

On the hotel side, most European countries are seeing decreases in the BAR rates quarter-over-quarter, and soft increases year-over-year. And while Europe’s occupancy levels are trending slightly higher in 2024, average hotel rates in the region year-over-year are trending down by 1%. And we’re also seeing that trend quarter-over-quarter as well. Most markets in Europe are seeing flat to moderate increases year-over-year. Birmingham and Newcastle upon Tyne in England, Levitsa in Poland, Oulu in Finland, and Eskesu here in Turkey, will see double-digit increases in Q2.

Miriam: Okay, Rossana, why don’t you take us to Latin America?

Rossana: All right, so in Latin America on the air front, intercontinental routes year-over-year business fares are down 1% and economy, fares were flat, and quarter-over-quarter, both are trending down. Latin America had the second-highest international sea capacity growth in 2024, only following Asia. And decreasing load factors are providing more access to lower fares.

For domestic and regional routes year-over-year, business fares are up 1%, and economy fares are down 1%, and quarter-over-quarter both are trending down, and domestic and regional fares are stabilizing. There was strong capacity development this winter, particularly in Brazil, and that has been absorbed by high traveler demand.

On the hotel front, overall BAR is level year-over-year in Latin America, but we are seeing quarterly increases. Mexico and Brazil’s overall BAR has decreased. However, many key markets in Latin America have increased year-over-year, and those markets include Mexico City, Mar Del Plata, Santiago, Lima, San Jose, Panama City, and San Juan. And most markets in Latin America have increased occupancy levels in 2025, except for Argentina, Costa Rica, Mexico, and Puerto Rico.

Chad: And finally bring us home to the U.S. and Canada.

Rossana: So on the air front, Chad, for the intercontinental, routes year-over-year business fares are up 3%, and we’re seeing economy fares down 1%. The good news is quarter-over-quarter, both are trending down. Intercontinental business fares are continuing to rise and there’s an increased demand for business travel and that’s pushing up prices and premium segments. Intercontinental economy fares, again, are stabilizing, with capacity discipline being maintained due to ongoing supply chain issues, and the aerospace sector fares will remain high.

Domestic and regional routes year-over-year business fares are up 4%, and economy fares are down 2%. Quarter-over-quarter business class is trending up, and economy class is trending down. US domestic economy fares will continue to decline, influenced by the increased activity of low-cost carriers and rising uncertainty in the current economic environment. In contrast, U.S. transcontinental fares, particularly in business class, will experience solid year-over-year growth.

On the rail front, overall rail in North America is down 2% year-over-year, and quarter-over-quarter we saw rail fares trending down. The northeast corridor, with the Acela high-speed train, serves over 700,000 passengers every single day. And this does represent a unique opportunity for a shift from air to rail in the U.S. in those markets.

Acela fares are also decreasing year-over-year on most routes. The focus for them is on three major markets; New York to Washington is down 2%. New York to Philly is up 2%, and New York to Boston, those fares are actually down 9%. Amtrak fares are down by 4%, but Amtrak only accounts for 15% of business rail travel in North America, which I think a lot of people would be surprised to hear.

And then, on the hotel side, North America occupancy levels are trending marginally above 2024 levels. Year-over-year rates are up 2%, but we are seeing quarter-over-quarter trending down. Most markets are seeing moderate BAR increases, except for Houston, which is facing double-digit increases. And most Canadian markets are also experiencing decreases in BAR year-over-year and quarter-over-quarter.

Miriam: Thanks for that tour around the world, Rossana. We can’t have you on the pod without asking you about the biggest trend in 2025, which is AI and business travel. Now, I know that we all pretty much know what’s possible, but do you have any advice on what travel managers and programs should be asking their TMC that they might not be thinking about?

Rossana: I think some of the important questions they should ask include, “How are you using AI today?” Ask them for use cases. I think that’s extremely important.

Also ask, “How do you plan to use AI in the next 12 months?” And the reason why I say 12 months is that it’s really hard to create a long-term roadmap for AI. It’s not really a product with a delivery roadmap. It’s technology that’s incorporated into existing platforms, products and processes to improve outcomes, and many times this is happening behind the scenes. AI-based products or experiences may have a roadmap, but in general, the development should always remain agile.

Another question to ask is, “Are you partnering with an AI vendor, or are you developing AI in-house?” That’s a particularly important question to ensure any third-party AI vendor is properly vetted.

Another question, “What potential risks do you see to our program through the use of AI?” Make sure you’re asking that question.

Also, ask “If AI makes a mistake, how would your company address it and remedy it?”

And lastly, “Do you have an internal AI policy that provides clear guidelines for the responsible design, deployment, and management of AI across your business?”

Chad: Well, you’ve done it again, and I don’t know how you cram in so much information into 20 minutes, but you know the drill. Last question: What’s the one thing you want all of our listeners to remember from this episode?

Rossana: Well, Chad, I can say corporate travel changes daily and sometimes it changes multiple times within that day. It’s important for listeners to stay on top of industry developments, and your TMC should be proactively helping you do just that. If you’re not already a BCD client, call me. But BCD also has a variety of tools that can help our listeners, including the resources and blog sections of our website. Again it’s www.bcdtravel.com. And Advito also publishes continuous thought leadership on their website. And that’s www.advito.com.

Chad: Well, Miriam, half a year in our first State of the Industry episode done. What are your thoughts on business travel right now?

Miriam: For all of our listeners and even for me, it’s really nice to stop for a minute, take a look at what’s happening with the market, drill down on areas that are important to me as just a traveler in general and a manager of business. But I know that our listeners are keenly listening for those areas and regions that are important to them. And for Rossana to be able to bring all that to us in cooperation with Advito and the research team here at BCD Travel, I just think it’s a great way to kind of round out every quarter.

Chad: Absolutely. Absolutely. Could not agree more. Thanks so much everyone for tuning in. We’ll catch you on our next episode.

Conclusion: Thanks for connecting with us. BCD Travel helps companies travel smart and achieve more. We drive program adoption, cost savings, and talent retention through digital experiences that simplify business travel.

Learn more about the topics you heard on this episode by visiting bcdtravel.com/podcast.