American Express Global Business Travel predicts moderate price increases for 2016

American Express Global Business Travel predicts moderate price increases for 2016

NEW YORK — The American Express Global Business Travel Forecast 2016 predicts air, hotel and ground transportation prices will see modest gains in 2016, as a slowly-improving global economy and stronger demand outpace increases in supply.

Led by favourable market conditions in North America and tempered growth in Asia, the airline industry will see slight pricing gains as increased demand is offset by similar growth in capacity partially spurred by lower fuel costs. Global hotel performance is also expected to improve moderately in 2016, as limited increases in inventory fail to keep pace with the growing global appetite for travel.

Overall, North America is expected to continue its momentum from 2015 and experience healthy rate increases, while Asia-Pacific and Europe will show moderate gains. Ground transportation rates are expected to remain relatively flat as overcapacity, strong competition and a continued focus on ancillary fees persist globally.

American Express Global Business Travel’s annual forecast provides subscribers with over 1,800 pricing predictions across airfares, hotel rates and car rental rates in the Americas; Europe, Middle East and Africa (EMEA); and Asia-Pacific (APAC), as well as related travel management program recommendations.

“While we expect modest increases in global travel prices heading into 2016, travel managers are operating in an era of new challenges and evolving disrupters,” said Caroline Strachan, Vice President, Consulting, American Express Global Business Travel. “In addition to handling tasks such as measurement and compliance, new factors such as the sharing economy and mobile booking channels are becoming increasingly popular for business travellers. In order to thrive in this digital era, travel managers need to be aware of and dynamically adapt to these forces across a variety of geographies.”

In North America, business travellers can expect minimal increases in air travel categories in 2016. In the United States, the airfare outlook is mixed as the economy continues to show steady growth and corporate demand increases. However, weaker capacity discipline among carriers and changing traveller behaviors have resulted in lower yields. For short-haul flights, increased competition and growth among budget-carriers will help suppress price increases, while fares on long-haul flights are expected to remain relatively flat, particularly on routes to Asia and Latin America.

In Canada, the forecast predicts slight declines for short and long-haul prices as a result of strong competition and the lower price of oil, which continues to be a damper on the economy.

Increased demand and higher group travel are expected to drive strong rate increases for North American hotels in 2016. Overall, momentum from 2015’s strong rate performance is expected to carry on through 2016 as corporate travel managers continue to be challenged in negotiating aggressive discounts. Major U.S. cities, which are seeing higher occupancy levels, continue to be supported by robust corporate travel and group businesses. While a healthy pipeline of new construction is on the horizon, the impact from added inventory is not likely to appear until after 2016.

In secondary markets, excess inventory will dampen price increases while competition for customers is pushing hotel brands to focus on property renovations. Across Canada, variability persists within each province, however, the country is expected to see more moderate price increases (2.5%) in 2016.

The ground transportation market across North America is expected to experience limited growth in 2016, with ride sharing and ancillary charges continuing to be key themes. Despite aggressive attempts by suppliers to increase pricing, negotiated rates should remain largely flat although increased ancillary fees will drive up average costs. Smaller companies that are unable to negotiate corporate rates will see more significant price increases. Ride-sharing services are also expected to see greater mainstream adoption and expansion in 2016.