Paying the price
With buyers facing higher flight and hotel prices, six experts give their predictions and share tips on how to prepare and respond
Shop around for multiple rate types
Anu Kuchibhotla, Hotel Practice Line Lead, Global Business Consulting Amex GBT
Hotel rates in 2022 grew at a fast pace and further price rises are expected globally in 2023. The impact of inflation on fundamental service provision – staff, energy, food and beverage – will continue to compound lost income and talent scarcity from recent years, alongside pent-up demand for hotel accommodation as business travel and in-person meetings and events continue to recover.
Suppliers have headroom to keep increasing rates in the face of economic slowdown, with a wide gap remaining between supply and demand. Our Hotel Prices 2023 report analyses local, regional and global factors to forecast price rises in key business cities, including London (6.2%), Paris (10%), Dublin (8.5%), New York (8.2%), San Francisco (7.3%) and Hong Kong (1.3%).
Smarter sourcing strategies will be all-important in 2023. Travel buyers can mitigate the challenges by shopping around for multiple rate types, including public rates available in the GDSs, third-party rates and TMC preferred partner rates. They can also optimise hotel spend by using re-shop technology
Using rate caps will help shine a light on cities where inventory might be insufficient, and relevant data demonstrating demand and commitment will support bids. Rate-setting at individual hotels will vary, so relationship-building and communication will be even more important.
Make mental adjustments to new prices
Ben Parodi, EVP of Client Relations at Onriva
Until airlines have more capacity, high airline pricing will remain and be the biggest barrier for the recovery of domestic business travel. Travellers and travel buyers alike will need to make mental adjustments to new prices. They may currently be paying twice as much or more than they used to pay for the same flight, and they may even be able to book their employees on international flights for less money than they would pay for domestic flights.
Airline capacity is slowly increasing but is still down compared to 2019. When airline capacity increases, travel buyers will then start to see flight prices decrease and sticker shock wear away.
For 2023, travel buyers should prepare for increased travel costs and work closely and collaboratively with their airline partners to optimise savings as they, in turn, look to build stronger, direct relationships with corporate customers.
Rates will rise by up to 15%
Eric Meierhans, Chief Commercial Officer, HotelHub
Global inflation, weakened exchange rates against the US dollar and hotels facing increased costs because of staff resourcing challenges, higher wages and energy bills, will mean that hotel rates will continue to rise by anything up to 15% in the first half of 2023. However, the size of the increase will depend on city and destination and I suspect the increases will be primarily in Europe and Asia.
US hotel rates, while looking flat in absolute value as compared to pre-Covid, have in effect increased by 10% over the past two years for European and Asian travellers due to the dollar appreciation against other currencies. However, inflation in the US too will probably drive rates up there also to a certain extent.
Take a granular, nuanced approach
Julie Avenel, Vice President, Global Business Consulting at American Express GBT
Air fares are rising on key business routes globally, driven by capacity, inflation, rising fuel costs and surcharges, and more rigorous inventory management pushing travellers into higher fare categories
It’s more important than ever for buyers to have a granular, nuanced approach to fares, analysing spend by region, class, origin and destination.
Strategies include a review of contracting to identify an optimal approach, which could combine rolling dynamic sourcing with traditional sourcing. Given the pace of change, be proactive in your programme management and keep it under review.
Slow recovery in some regions means you may need to factor in 2019 data to better anticipate demand. Fuel surcharges have risen significantly but airlines don’t typically report these in quarterly business reviews, so you may not see your full spend with carriers. While negotiated discounts are not applicable to surcharges, insist that airlines at least recognise YQ/YR as part of your true travel spend.
Consolidate spend with fewer suppliers
Rich Johnson, Senior Director, CWT Solutions Group
Travel prices have skyrocketed in 2022 and will likely continue to climb in 2023. The strong recovery in both leisure and business travel demand, coupled with supply-side issues including higher energy costs, labour shortages and broader inflationary pressures, have caused travel prices to increase sharply, albeit from a low base.
These demand-supply dynamics are expected to continue, keeping prices elevated in the year ahead. In our latest Global Travel Forecast, we have projected that global air fares will increase 48.5% year-on-year in 2022 and a further 8.45% in 2023, while hotel rates will increase 18.5% in 2022 and 8.2% this year.
To mitigate the impact of higher prices on their travel programme, travel buyers should encourage their travellers to book further in advance, consolidate spend with fewer suppliers to be in a stronger negotiating position and form genuine, win-win partnerships with suppliers and finally, think strategically. Don’t lose sight of your sustainability and employee wellbeing objectives while trying to keep costs under control.
Prices will regulate as more rooms open
John Hobbs-Hurrell, Head of the Advantage Global Network
Accommodation daily rates in some cities were very high in the first three quarters of 2022 but we were encouraged to see some of these rates start to plateau and we expect to finish the year on an even keel. There will be some anomalies, with New York and Paris continuing to see increases of around 10-15% per quarter, whereas London fell back by 2%.
Heading into next quarter we are expecting to see demand for travel increase, the average length of stay to be consistent and pricing to regulate. We understand that not all pricing is driven by demand as there are some inflationary challenges and recruitment pressures too.
There is confidence that suppliers will be able to open their properties with full room inventory in 2023 and this should see the average price regulate.
For more business travel trend, see our Trends Special