It’s been a challenging period for hoteliers as they’ve dealt with the lingering effects of COVID. Making it more daunting is the rising costs of goods. Now, according to the 2024 Global Business Travel Forecast, published last month by the Global Business Travel Association, global business travel and event costs are set to increase through the remainder of this year and into next, although increases are expected to be more moderate than in 2022.
According to the GBTA, rising fuel prices, labour shortages, and supply chain challenges, coupled with red-hot demand, caused travel prices to skyrocket in 2022 far surpassing some of the increases outlined last year.
“A potent combination of demand and supply-side pressures propelled travel prices higher than expected last year,” said Patrick Anderson, CEO of CWT, the business travel and meetings specialist group. “Looking forward, prices seem to be levelling off with much milder increases projected over the next 12 to 18 months. We could now be looking at the true new cost of travel.”
The report shows that the global average ticket price (ATP) of flights booked for business travel rose dramatically in 2022, experiencing record increases. The ATP rose by 72.2 per cent YoY to $749 in 2022, far surpassing 2019 levels ($670). While demand has recovered strongly with passenger numbers quickly approaching pre-pandemic levels, driven primarily by pent-up leisure travel demand, airline capacity continues to be impacted by labour shortages and supply chain issues. Looking forward, ATP growth is likely to be more modest at 2.3 per cent in 2023 and 1.8 per cent in 2024, albeit from an already high base. Still, many corporate buyers now have less leverage to negotiate with airlines, as their travel volumes remain below pre-pandemic levels.
Like air travel ATPs, the global average daily rate (ADR) for hotel bookings exceeded earlier predictions, rising 29.8 per cent YoY to $161 in 2022. Occupancy rates have been high, but so have labour, energy, and food and beverage costs. In fact, several cities across the globe including London, Miami, and Singapore, reported their highest ADRs on record in 2022. Meanwhile, hotel construction remains down from its pre-pandemic peak, creating supply constraints. With fewer properties to compete against, existing hotels can sustain their pricing power for longer, even though ADR gains are slowing. ADRs are projected to climb a further 4.3 per cent in 2023 to $168, followed by a 3.6 per cent increase to $174 in 2024.
North America experienced the highest growth in hotel ADRs of any region in 2022, rising 33.8 per cent YoY to $174. Occupancy in the region is expected to grow at a slower pace in the second half of 2023 and 2024 due to economic concerns, with ADRs forecast to rise four per cent to $181 in 2023 and 3.3 per cent to $187 in 2024.
Finally, the report shows that lead times for events remain short in this post-pandemic world. However, organizers should now look at 2024 with a 12-month planning cycle if they want to keep prices at a reasonable level. At the same time, consolidating transient travel and M&E spend can give buyers more leverage when it comes to negotiating pricing.
