Lower air costs, higher hotel prices on the horizon says American Express’ Global Business Travel Forecast

Lower air costs, higher hotel prices on the horizon says American Express’ Global Business Travel ForecastMARKHAM, ON — Lower airfares are on the horizon, according to the 10th installment of the American Express Global Business Travel Forecast.

 

The Forecast looks at three key travel sectors – airfare, hotel and ground transportation, and found that local influences within Canada are playing a significant role in determining travel costs next year.

The study revealed that because of budget airlines expanding their U.S.-Canada transborder networks, significant declines in transborder fares are anticipated next year for both the U.S. and Canada. According to the Forecast, low-cost carriers are expected to introduce new premium economy offerings that will likely provide more travellers with an alternative to business class travel and international capacity is increasing, which is all expected to contribute to lowering long haul prices in 2014.

Additionally, carriers with business short haul and trans-border routes are expected to also increase with more products, more capacity and more routes. In particular, some economy airlines are expected to make new inroads to U.S. destinations while also expanding their fleets.

The anticipated growth in low-cost options should force larger airlines to lower their costs in order to compete in this space.

Conversely, travel costs in the ground transportation and hotel sectors are expected to rise. Prices are anticipated to climb by 1 to 1.5% in the ground transportation sector due to rising fleet cost and consolidation, though this is tempered by increased competition. In the hotel sector costs are expected to increase by 2.4 to 6.4% (for both mid-range and upper-range hotels), with local trends in Toronto, Montreal, Quebec, Calgary and Vancouver fueling the rising hotel costs.

“With continued economic uncertainty moving into 2014 and some travel costs on the rise, it is more important than ever for companies to ensure their travel investments are allocated to support the achievement of their overall business objectives,” said Colin Temple, Vice President & General Manager of Global Business Travel at American Express Canada.

The Canadian hotel industry is defined by a few key cities, each of which is unique in terms of its balance of corporate, event-based and leisure travel.

  • Toronto’s hotel market is very strong and demand is high for all segments, including the new luxury hotel supply, which has resulted in 3.4% YOY growth YTD 2013. Higher growth projections are also anticipated for 2014.
  • Montreal is North America’s fourth largest centre in terms of aerospace jobs and is home to several large international air transportation organizations such as IATA, ICAO and SITA. Hotels enjoy a strong contribution from both leisure and meeting business.
  • Calgary continues to grow as a services hub for the energy industry, which is directly linked to the strong hotel performance. While in the long term the U.S. plans to develop its energy independence, potentially impacting oil prices and softening demand, in the near term Calgary is facing a continued capacity crunch with new hotel development limited to the airport business community and the University of Calgary.
  • Although Vancouver is known for international commerce and trade, mining and forestry, software development and biotechnology, hotel performance is strongly influenced by tourism. Instead of being driven by GDP, hotel prices are actually driven by seasonality and prices typically go up from May through September because of an increased demand from visitors by air and cruise ship arrivals.
  • Halifax is the largest city economy in Eastern Canada and continues to do well. Two offshore exploration energy projects and new shipbuilding contracts contribute to the predictions for respectable travel growth in demand and prices.