Travel costs – outlook and market update

Now may not be the right time to forecast the future.
Producing a credible travel pricing forecast in the current environment is incredibly difficult.

The world we live in right now presents additional challenges for forecasters:

  • The near-term travel outlook is more uncertain than ever.
  • Volatility has never been so high and seems likely to persist.
  • There’s vast variation in market performance and outlook.

Under these conditions, it’s unlikely that any pricing forecast will produce reliableresults.

With uncertainty so high, it’s more important to inform and update ourselves on the latest market developments and trends, so that suitable responses and plans can be developed.

Mike Eggleton, Director of Research and Intelligence at BCD Travel, shares in this video why we’re not producing an Industry Forecast for 2023.

The near-term travel outlook is more uncertain than ever

A tipping point in the recovery may lie ahead, but it’s unclear when and how this will happen.

Multiple risks must be factored into any outlook. An outlook must take account of both downside and upside risks.

Forecasting used to be a low-risk activity

In the past, a stable environment made it possible to forecast price inflation with confidence.

In most of the 2010s, the business environment was fairly stable. It was much easier to create, what appeared to be, robust forecasts.
Global inflation demonstrates this point. For much of 2012-19, it stayed in a 2.6%-3.8% range. This meant you could propose a 3% forecast, with little
fear of being too far wrong. Not so from 2021, as volatility took hold.
Stability made forecasts look far more reliable than the assumptions and models on which they were based.

It’s currently hard to create a credible price forecast

CWT/GBTA’s forecast shows how hard it is to make reliable pricing predictions. They originally predicted global airfares would rise by 3.3% in 2022. Its Nov. 2021 report was published before Omicron and the Ukraine conflict.

In the first half of 2022, U.S. domestic airfares increased by 35%; a tenfold error in CWT’s outlook. With four months of 2022 remaining, and with airfare pricing losing momentum, CWT has revised up its 2022 forecast to 48.5%, which seems excessive.

CWT now expects business fares in North America to surpass pre-pandemic levels by the end of 2022. But fares are already 18% above them in the U.S. Airfares in 2022 – U.S. domestic v 2019 and 2021 Hotel rates – first half 2022 year-over-year CWT original forecast CWT revised forecast Original forecast Revised forecast.

Having originally predicted a 13.1% year-over-year rise in global hotel rates for 2022, CWT has now revised this figure up to 18.5%.

So far in 2022, global rates have increased by approximately 24%. On this basis, CWT must anticipate a slowdown in average daily rate inflation in the second half of 2022. Data for the month of June supports this view, with global rates rising 15% year-over-year. But Asia Pacific has a lot of ground still to make up on other regions. The prospects for a Chinese recovery remain an important unknown at this stage.

Outlook: cost of living inflation in the Americas

Inflationary pressures are more intense in South American countries.

  • Among the countries in North and Central America, Mexico faces the strongest inflation. By 2023, its cost of living is forecast to be almost one-quarter higher than in 2019.
  • Inflationary pressures are generally more intense in South America. In 2023, most countries can expect prices to be 20-30% above 2019 levels.
  • Argentina is an extreme case. High inflation is set to persist into 2023, when the cost of living is predicted to be 479% higher than in 2019.

Outlook: cost of living inflation in Asia Pacific

Inflation is generally low, and this points to little material change in 2023.

  • Inflationary pressures are generally weakest among countries in Northeast Asia. Japan’s cost of living in 2023 is expected to be just 3% above 2019, Hong Kong’s 7% and China’s 8%.
  • Expectations for 2023 for countries in Southeast Asia and Southwest Pacific lie in a 7-17% range, with Australia and New Zealand at the top end.
  • Inflationary expectations are strongest for Pakistan, where consumer prices in 2023 may be 42% above what they were in 2019.

Outlook: cost of living inflation in Europe

After rising fast in 2022, the pace of inflation should slow rapidly in 2023 in most countries.

  • By 2023, Poland’s cost of living is set to be more than one-third higher than in 2019. At 19% and 15% respectively, the U.K. and the Netherlands will see the strongest inflation among the remaining major European economies.
  • The inflationary prospects for the other smaller European economies for the 2019-2023 period lie in a much narrower range of 11% to 14%.

Market update: global hotel costs

The rise in average daily rates compared to 2019 varies significantly by region.

During the first six months of 2022, global hotel rates advanced to 1% above their pre-pandemic levels. But this low figure is the result of rate weakness persisting in Asia Pacific, where ADRs are still 16% below their 2019 levels.

In other regions, rates are much stronger, averaging 15% above 2019 in the Middle East & Africa and 10% higher in the Americas.

June’s performance is quite different to the year-to-date average.

Globally, rates were 3% higher than in June 2019. Rate improvement has strengthened in the Americas, while a comparison to the year-todata average suggests a loss of momentum in the Middle East & Africa.

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