Travel / Meetings / Conferencing / Events
3 things corporate travel buyers can expect in 2018
6 Dec 2017 - by Staff reporter
Come 2018, corporate travel buyers can expect an increase in car rental rates, airfares, and a push toward dynamic hotel rate pricing. This is according to the 2018 Global Travel Forecast released by the Global Business Travel Association.
The report details travel pricing and the macroeconomic factors which influence it. In collaboration with Carlson Wagonlit Travel, the report is designed to enable travel buyers to create and support their travel programs, whether local or international.
Global air projections
Airline pricing is expected to increase, with the global airline industry’s capacity expected to grow approximately 6% in 2018. Corporate travel programs are therefore expected to be more traveller centric in 2018 - or risk negative impact on productivity, job satisfaction and employee retention.
Segmentation of fares is complicating airline pricing. The segmentation of fares allows travellers to purchase from a basic economy restricted fare up to a range of upgraded fares with specific service options.
On a macro level, segmentation is changing the broader definition of carriers as the line between full service, legacy, low-cost and ultra-low cost becomes increasingly difficult to discern. Segmentation introduces some challenges for buyers in controlling costs. Some have blocked these fares from their corporate booking tools as it had raised their total costs when using them with ancillary services. Adapting travel policy and educating travellers regarding unbundled, branded fares may help both cost control as well as traveller satisfaction.
2018 airline prices are expected to increase along with oil prices. Airlines have committed to reinvesting earnings into equipment and services which benefit customers and reduce debt. Many carriers have made significant capital investments to improve or expand terminal space. As oil prices rise, recurring fuel charges might also occur.
The UK and US electronics ban which requires passengers from certain airports to check in their electronics, as well as the recent US entry restrictions from specific Muslim-majority countries have impacted worldwide sentiment and travel spend.
Global hotel projections
There is a steady push from suppliers to move corporate buyers away from fixed, negotiated hotel rates toward dynamic rate pricing. These rates have not proven advantageous for buyers historically. A blended program which offers both dynamic rates with a maximum threshold as well as fixed rate may work for both suppliers and buyers.
The impact from mega mergers is likely to be felt with the 2018 hotel RFP season. Buyers will most probably be working with a single contact for Marriott/Starwood to address all issues, and the same may soon hold true for others. Instead of operating with numerous brands to market and support, mega hoteliers may soon consider simply combining operations. Traditional hotels are diversifying with value added concierge services to cater to the growing demand of traveller experiences. Airbnb, in 2016, added “Trip” to allow travellers to connect with fee-based tours and activities.
“Smart” hotels are hotels investing in technologies which enable heightened personalisation for travellers. There will be an increases use of apps in the check in and out process, as well as allowing travellers to unlock their hotel room, operate their televisions, and control the room temperature from their mobile devices.
Global ground transportation
The price of ground transportation is expected to increase moderately. Corporate travel buyers scan expect slight price hike in 2018 as the global car rental industry improves. As the demand improves, car rental companies shift from a simple market-share focus toward profitability goals. Record new car sales are predicted over the next five years, which will push up per unit fleet cost, while used car sales are expected to drop 50% in the same period. Residual value for used rental cars will be greatly impacted, and current rental car pricing will be unsustainable.
Rising oil prices are likely to impact the well-being of ground transportation suppliers. Market specific regulations for curbing emissions will also have an effect. Lower emissions requirements are already in place in numerus countries resulting in leading companies increasing availability of environmentally friendly rental cars.
It is anticipated that sharing economy suppliers like Uber and Lyft will continue with double digit growth of approximately 10% in 2018. Costly regulations and government bans are impeding their growth, which has an impact on their rates. Uber competes aggressively in a number of markets, and continues to diversify with services such as food delivery and ride sharing.
All segments of the ground transportation industry are expected to see further innovation in 2018 bringing the likes of mobile apps, self-drive vehicles, and higher speed rail options.