Intercontinental airfares return to normality, hotel rate increases accelerate
Even some of the most advanced algorithms will have trouble looking deep into the future to make accurate predictions. To combat this uncertainty when analyzing trends across all travel categories, we’ve decided to produce a quarterly travel price index report for air, hotel, rail, and rental car prices.
Market snapshot: North America
This quarter we are seeing the biggest drop in economy fares year over year to most destinations domestically and to Europe, South America, Africa, Asia and Southwest Pacific. This is driven by the rise in competition between airlines in a fast-growing capacity environment. However, business fares continue to grow except to Asia and Southwest Pacific due to the strong capacity recovery there. This continued increase is due to the steady flow of corporate traffic paired with the rise of premium leisure travel.
We are seeing hotel rates continue an upward trend across North America, with the exception of California and Arizona. The price growth in five key markets, New York, Chicago, Washington, Boston and Seattle, is contributing to the overall increase in the United States. In Canada, the Ottawa market is experiencing the most significant increase compared to other markets. Overall, North America occupancy still hasn’t caught up to 2023 levels.
Rail prices in North America are down, providing a unique opportunity for a shift from air to rail in the Northeast Corridor with Acela. Year over year we’ve seen fares decrease on three key travel routes from New York including Washington, Philadelphia and Boston. We also expect to see a slight drop in rental care daily rates as supply chains have stabilized. With a larger availability of cars compared to previous quarters, the pressure on rates has eased, leading to more favorable pricing for travelers.
What is an index?
As a quick reminder, it’s important to note that this report is not a forecast. A forecast uses published rates and fares, along with other socioeconomic data and world events to predict how rates and fares will change. This is an index. An index quantifies how published rates and fares are changing and avoids making predictions for long-term trends.
The Advito travel price index looks at actual, historical pricing data and compares it with future shopping data for the remainder of the quarter to analyze variance versus the previous period and the trend versus the previous quarter. We are shopping millions of public price points, and our shopping technology behaves like a business traveler. Our first index was released in Q4 2022, and after a positive response from clients looking to understand pricing trends in the short- to medium-term, we have produced similar reports for each quarter.
The full report features global trends, a breakdown of each region, as well as travel sector types. In the air analysis, we look at both business and economy class fares, as well as intercontinental and regional travel. In the hotel report, we’re analyzing the variance in average daily rates between Q4 2023 and Q4 2024, as well as the quarter-over-quarter trend. The result is a reliable report based on published airfares and hotel rates that does not make long-term predictions.
One of the most challenging parts of being a travel manager today is understanding how the constant change in the industry affects your program. Our air and hotel experts have used the travel price index to come up with some key focus areas for travel managers to address as we head into the final quarter of the year.
Air program focus areas
As we approach the last quarter of the year, there are several areas to focus on in your air program to ensure that it is set up for success. With airlines actively looking for more business, the inflation of airfares is coming to an end, making now a great time to reevaluate your supplier contracts. The continued expansion of NDC, it’s important to make sure you’re continuously assessing whether these changes could add value to your program before adopting this new retailing model. Plus, as the year draws to a close, there’s no better time to assess how well you’ve stayed on track with your sustainability goals. Take this opportunity to evaluate the environmental responsibility practices of your preferred airlines to ensure your air strategy remains aligned with corporate sustainability objectives.
Hotel program focus areas
With annual RFP negotiations lasting 4-5 months on average, your program is at risk if you haven’t launched the 2025 RFP yet for a calendar-year program. The best action to take now is to consider a “fast-track” strategy, soliciting hotels with the intent to accept and set a realistic target price upfront to avoid or reduce the heavy lift of negotiations. This will help you quickly accept or reject bids without needing additional rounds of negotiation. Keep in mind that suppliers are pushing an industry-wide dynamic initiative, meaning that fixed-rates will be harder to come by. Take the time to analyze the offered dynamic discount against your agency consortia programs and brand-wide discounts. By focusing on a multi-source content strategy you can increase traveler confidence, program adoption and drive incremental savings.
Interested in the full Advito Travel Price Index Report? Access your copy of the full report with a breakdown of each region here!