Business trips will become significantly more expensive in 2023

Global travel prices are expected to continue to rise in the remaining months of 2022 and throughout 2023. This is according to the Global Business Travel Forecast 2023, published by business travel services provider CWT together with the Global Business Travel Association (GBTA), the voice of the global business travel industry, was published. Rising fuel prices, labor shortages and inflationary pressures in commodity costs are the main drivers of expected business travel price increases, according to the report, which uses anonymized data from CWT and GBTA with publicly available industry information, as well as econometric and statistical modeling from the Avrio Institute.

"Demand for business travel and meetings is back, there's no doubt about that," notes Patrick Andersen, chief executive officer of CWT. "Labor shortages across the travel and hospitality industry, rising commodity prices and a greater awareness of responsible travel are impacting services, but projected prices are broadly in line with 2019." And Suzanne Neufang, CEO of GBTA adds, "What we're seeing now are several factors that come into play when corporate travel buyers and procurement officers model their travel programs. This eighth annual joint forecast combines statistical travel data and trend analysis with macroeconomic influences to provide an important reference point for business travel planning."

Macroeconomic influences

The global economy contracted by 3.4 % in 2020, experiencing one of the sharpest declines since World War II. Services sectors, including travel and hospitality, were hit particularly hard, but the global economy recovered quickly from the 2020 lows and grew by 5.8 % in 2021. Economic growth is moderating as the recovery continues, although concerns about another recession are growing. The current baseline scenario for 2022 assumes growth of 3 %, followed by growth of 2.8 % in 2023. The 2023 Global Business Travel Forecast also notes the three main forces putting pressure on the economy and the business travel industry. These include Russia's invasion of Ukraine combined with other geopolitical uncertainties, inflationary pressures driving up costs, and the risk of further COVID outbreaks that could limit business/business travel.

Conversely, the report highlights that companies are placing sustainability among their top priorities, and combating climate change is becoming increasingly important. The report highlights that greater visibility of greener travel options at the point of sale, as well as carbon footprinting and environmental impact assessments, are ways for the travel industry to actively contribute to responsible decision making.

Meetings and events

Prices have increased across most spend categories in all regions, fueled by pent-up demand, a desire to strengthen corporate culture, and an uncertain economic outlook. The cost per attendee for meetings and events is expected to be about 25 % higher in 2022 than in 2019, and is projected to increase another 7 % in 2023. In addition to pent-up demand, corporate events are now competing with many other types of events that were canceled in 2020. And with many companies abandoning office space in favor of remote work during the pandemic, they are now booking meeting space so employees can meet in person, further fueling demand.

Shorter lead times for events, varying from six to 12 months to one to three months, are also contributing to this "perfect storm," perhaps underscored by companies' concern that the current situation could change very quickly. This is particularly noticeable in Asia Pacific, where post-pandemic reopenings have been slower than in other regions, with ongoing restrictions in China driving clients to ensure their events can take place, and as quickly as possible.

Business trip flights

Airfares for business travel decreased by over 12 % in 2020 compared to 2019, followed by a further decrease of 26 % in 2021. Economy ticket prices decreased by over 24 % from 2019 to 2021, while premium ticket prices decreased by 33 %. Prices are expected to increase by 48.5 % in 2022, but even with this large price increase, prices are expected to remain below pre-pandemic levels through 2023. After rising 48.5 % in 2022, prices are projected to rise 8.4 % in 2023.
Rising demand and continued increases in jet fuel prices, which have caused prices to double to more than 160 $/barrel in some markets, according to S&P Global, are putting upward pressure on ticket prices. First-class tickets accounted for over 7 % of all tickets purchased in 2019. The share of these premium tickets fell to 6.5 % in 2020 and to 4.5 % in 2021, but has been rising again since 2022. In the first half of the year, premium tickets accounted for 6.2 % of all tickets purchased. An increasing share of premium tickets will lead to higher average prices, as the average ticket price is made up of economy and premium.

International and cross-border bookings are recovering in most regions, which will lead to a higher share of international ticket bookings and a correspondingly higher average ticket price, despite the uncertainties caused by the war in Ukraine. After two years of minimal or no spending, business travelers will likely be willing to spend more on tickets, especially as availability declines due to labor shortages. This upward trend is largely due to the introduction of vaccines and the reopening of borders.

Hotels and rental cars

Hotel prices fell by 13.3 % in 2020 compared to 2019 and by a further 9.5 % in 2021, but the report expects them to rise by 18.5 % in 2022, followed by an increase of 8.2 % in 2023. In some regions, such as Europe, the Middle East and Africa, and North America, hotel prices have already exceeded 2019 levels, and this is expected to be the case globally by 2023. Hotel prices have already risen sharply in some parts of the world, including by 22 % in North America and a projected 31.8 % in Europe, the Middle East and Africa, reflecting an accelerated recovery combined with ongoing capacity constraints. Hotel rate increases were initially driven by strong leisure travel in 2021, but group travel for corporate meetings and events is increasing, and transient business travel is also gaining significant momentum, putting further pressure on average daily hotel rates.

Global car rental prices decreased by 2.5 % in 2020 compared to 2019, before increasing by 5.1 % in 2021. Prices are expected to rise by 7.3 % in 2022, reaching a new high, and increase by a further 6.8 % in 2023. There are many reasons for this: the vehicle industry is still facing capacity constraints, and car rental companies, which downsized their fleets after the pandemic, have not yet fully recovered. Car rental companies have switched to buying used vehicles to increase fleet size and are keeping their vehicles longer. Some rental companies are also buying vehicles from manufacturers that are not among the brands they traditionally support.

Skyrocketing prices, vehicle shortages and the need to monitor door-to-door carbon emissions are driving business travel managers to incorporate ground transportation into overall trip planning from the start. This is especially true when considering the inclusion of electric vehicles. Even if widespread adoption is still a few years away, personal preference should not be underestimated.

Source: CWT