How to manage rising business travel costs

Following on from pandemic-imposed travel hiatus, there is no doubt that people are making a point of travelling as often as they can afford. This is not mere conjecture: Consumer Price Inflation data published by Statistics South Africa in June indicates that passenger transport by air increased by a massive 49.5%.

This is undoubtedly good news for both travellers and the travel industry, which has started to make a strong recovery in the third quarter of 2022.

The downside is that travel costs are set to rise even higher. Global Business Travel Association (GBTA) has predicted that 2022 will see a full year average increase of 48.5% in air fares, 18.5% in hotel rates and 7.3% in car rental charges. In 2023, air fares are expected to rise by 8.4%, hotel rates by 8.2% and car rentals by 6.8%.

What is behind increased travel costs?

There are myriad factors influencing the massive travel cost hikes.

One of the most obvious is jet fuel prices that have increased by around 220% over the last year. Considering jet fuel makes up about 50% of airlines’ total operating costs, it was inevitable that this would be passed on to the consumer.

Additionally, since passenger air travel in South Africa increased exponentially over the last year, driven by strong demand and the closure of several domestic routes, this has placed added pressure on carriers. However, given the high demand airfares will remain high so long as planes are full. Essentially, it’s a sellers’ market.

A further driver behind the price hikes is what has been termed “drip pricing.” Simply put, this is a pricing technique where companies advertise only part of a product’s price and reveal additional charges as the customer is about to pay. These “ancillary” costs include preferred seating, extra baggage costs, paying for refreshments on-board amongst others.

Compounding all the above variables, are labour shortages across the travel and hospitality industry, rising raw material prices, and greater awareness for responsible travel that are all having an impact. 

What you can do to reduce overspending

Agility will be a key factor to success for travel programs moving forward.

  • While travel pricing is in flux, adopt a dynamic travel policy approach. It lets travel buyers adjust their air program to shifting market conditions and changes in their own travel patterns and policy. This way you won’t overpay for business trips.
  • Where possible, roll over existing supplier agreements. Beyond savings, you can negotiate with airline partners for refunds, credits and vouchers – and advocate for fuel surcharge and distribution surcharge termination.
  • Claim unused credits. During the uncertainty of the pandemic most airlines issued credit vouchers. Make sure you are either refunded for unused tickets or that you use the credit vouchers before they expire.
  • Make sure you have access to Business intelligence reporting. This way it’s possible to proactively track spend and understand any changes. If costs increase on a particular route, the travel buyer can immediately investigate the cause and negotiate a better discount or review its supplier programme.
  • Lastly, you snooze, you lose. Never has it been more important to book in advance to make sure you get the best rates.

Once travel becomes more “normalised” – a relative term – and the industry returns to pre-COVID conditions it is hoped that prices will start to level out.