2018 Industry Forecast: Hotel rates rise, airfares stay put

Advito predicts what’s next for travel risks, airline distribution, tech innovations and more.

Bob Brindley, vice president and principal, Advito

Advito’s 2018 Industry Forecast predicts a modest rise in global hotel rates and mostly flat airfare prices, except in markets where demand is greatest. The annual report also highlights:

  • The lack of hotel availability at preferred rates
  • Issues with traveler security and risk
  • Challenges related to airlines’ New Distribution Capability (NDC) standards
  • Machine-learning innovations that benefit business travelers and their employers

“In many ways, global corporate travel in 2018 will be remarkably similar to 2017; demand continues to grow slowly, but steadily, for the air and hotel sectors,” said Bob Brindley, vice president and principal of Advito, the global travel consultancy that produces the annual study.

“Because hotel demand is outpacing capacity, prices will rise about 2% to 4%, depending on the market. The relatively low price of oil means that airlines can add capacity in step with demand, while keeping prices in check,” he said. “Generally, the market favors buyers, as price increases in dominant markets will be offset by lower fares in competitive markets—producing balance in the overall picture.”

The 2018 Forecast notes one major change on the horizon. Corporate car rental prices in North America are expected to rise as much as 5% next year as operators try to make up for higher fleet prices and a downturn in the resale market. This is a significant shift compared to recent years when prices dropped.

Brindley and Jason Kramer, managing consultant of Advito, will discuss the business travel outlook during a 2018 Industry Forecast webinar on Sept. 21, hosted by the Association of Corporate Travel Executives.

Join the Sept. 21 webinar:  7:30 a.m. PDT | 10:30 a.m. EDT | 3:30 p.m. CET | 10:30 p.m. SGT

Among trends in the report and on the ACTE webinar agenda:

Hotel rate availability challenges

One of the most vexing problems for corporate travel buyers in 2018 will continue to be hotel rate availability. As hotels become more sophisticated in yield-management techniques, business travelers are increasingly unable to find and book rooms at preferred rates. Advito research reveals that preferred rates were unavailable 24% of the time on a global basis and 33% of the time for European hotels.

“This trend can reduce the value of negotiated rates,” Brindley said. “To address this challenge, we recommend that clients track rate availability and renegotiate where appropriate. In certain cases, clients may consider dropping a property from their programs or shifting to a dynamic discount to improve savings. Companies that tackle this issue most effectively manage their activity with standard hotel rate audits, rate availability audits and hotel price assurance services.”

Travel risk and security concerns

Geopolitics and terrorism are exposing more business travelers to risk. Deteriorating diplomatic relations between the U.S. and Russia and escalating tensions in the Korean Peninsula raise new safety and security concerns. Changing visa and immigration regulations and security efforts like in-flight laptop bans also add uncertainty to business travel.

Corporate travel departments must keep up with what’s happening in geopolitics and understand how political upheavals, natural disasters and terrorist attacks anywhere in the world could affect their travelers. Advito advises travel program leaders to explore travel risk management solutions that enable communications with travelers during trips; boost duty of care compliance; allow companies to alert, locate and assist travelers in a crisis; and help travelers know what to do to protect themselves on the road.

Accelerated promotion of NDC standards

Buzz is building for the International Air Transport Association’s New Distribution Capability (NDC) standards, which enable direct-booking channels that let airlines present bundled packages, rather than choices based only on price. Airlines first began encouraging travel management companies and their corporate clients to move to new direct booking channels using IATA’s NDC standards back in 2015. The effort is getting attention now because airlines are increasingly imposing surcharges for bookings made through non-direct channels.

“While it’s essential for outdated technology to evolve, companies should be aware of underlying challenges with this system, including access to transparent, consolidated information for efficient comparison shopping, duty of care responsibilities and traveler support,” Brindley cautioned. “By locking into NDC agreements, one of the greatest dangers is that companies may reduce their long-term negotiating power. Currently, one of the great strengths of a global distribution system (GDS) is its aggregation of content, enabling comparison shopping between suppliers.”

Machine learning yields savings and simplification

Third-party suppliers are using machine learning to enable corporate travel programs to find new travel savings and reduce traveler stress through applications such as predictive pricing, forecasting flight delays and rebooking flights after tickets have been purchased. Such advancements automate savings, simplify the trip experience for travelers and help them make smarter decisions on the road.

Learn how Advito experts can help prepare your travel program for the future and find elusive savings through virtual collaboration, traveler engagement and year-round program performance management. Go to advito.com.

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