Prices in Global Travel Industry Likely to Slow in 2020
India’s strong economic growth is fueling a greater demand for business travel and driving up prices. Airfares are forecast to increase by 5%.
After posting sharp rises in 2019, prices in the global travel industry are likely to slow in 2020, with flights rising a modest 1.2%, hotels rising only 1.3%, and rental car rates up 1% (in USD terms), according to the sixth annual Global Travel Forecast, published today by CWT and GBTA. While the global economy is doing well overall – and expected to grow a solid 3.6% in 2020 – a raft of uncertainties are set to put a damper on pricing.
Kurt Ekert, CWT’s President and CEO said that the risks and ambiguity have increased over the past few months – not least the threat of escalating trade wars, the impact of Brexit, possible oil supply shocks, and the growing likelihood of a recession. This forecast will help travel buyers make the right decisions in an increasingly challenging environment.
India’s strong economic growth is fueling a greater demand for business travel and driving up prices. Airfares are forecast to increase 5% (in local currency terms; 0% in USD terms), while hotel rates and ground transport prices are expected to climb 6.8% (1.8% in USD terms) and 4.5% (-0.5% in USD terms), respectively.
Vishal Sinha, CEO, India, CWT, said that earlier this year they saw a spike in airfares after Jet Airways ceased its operations in April, so they are already at a high base in 2019. With other airlines adding capacity to fill the vacuum, fares have begun to normalize and we expect that to continue next year. However, if the rupee weakens against the dollar, Indian carriers could be faced with bigger fuel bills and we might see that being passed on to travelers, he said.
He said that hotel rates are also expected to rise, as the demand for rooms outpaces supply, especially in secondary cities like Chandigarh, Jaipur and Ahmedabad. At the same time, the commercialization of mid-tier properties by players like Oyo are also pushing prices upwards.
Released on Wednesday by the Global Business Travel Association, the voice of the global business travel industry, and CWT, the B2B4E travel management platform, the 2020 Global Travel Forecast uses data generated by CWT Solutions Group, to give an early look at the trends and developments that will shape the business travel industry in the year ahead.
Scott Solombrino, GBTA COO and Executive Director, said that technological advancements and an increasingly volatile economic and political landscape across the globe have changed the way today’s travel buyers need to do their jobs. This annual forecast provides insights into the key drivers forcing these shifting priorities and gives a road map for travel buyers looking to plan their 2020 travel programs, he said.
Asia Pacific Scenario:
Air: 1.3% Hotel: 1.3% Ground: 0.5%
Asia’s expansion has slowed down due to worsening US-China relations, tighter global financial conditions, and natural disasters. But the region remains the most dynamic, with steady GDP growth, benign inflation, and a sense of optimism.
Air: In Asia Pacific, the shutdown of India-based Jet Airways’ operations in April created a gap in the market for some key routes, and the reduced competition has meant higher airfares – but with other airlines adding capacity to fill the vacuum, fares have begun to normalize.
Hotel: Asia’s hospitality industry is booming with hotel investment volumes predicted to grow 15% year-on-year. Japan will host the Rugby World Cup later this year, and the Olympic and Paralympic Games in 2020, which will boost visitor numbers to the region. The Japanese hotel market is seeing a sharp increase in supply to accommodate the anticipated surge in visitors to the country during these events.
Ground: In China, steady demand and increased competition will hurt car suppliers. Across Asia Pacific, ride-sharing is booming, with many companies allowing their employees to use these services for business travel. Providers like Didi Chuxing, Grab, Go-Jek and Ola are pursuing aggressive expansion plans, while also taking steps to put more stringent safety measures in place.