Weakened leisure demand eases cost increases in airfares and hotel rates
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: Europe
Domestic and regional fares are still up year over year driven by a combination of steady demand and a decrease in domestic capacity in Germany, France and the UK. Intercontinental fares to most destinations are also on the rise driven in part by growing costs such as environmental surcharges imposed by some European carriers. Asia is the only region where we are seeing a notable drop in fares out of Europe, largely due to the substantial increase in flights to China during the winter season.
We are seeing hotel rate increases begin to flatten out year over year, with most markets experiencing a downward trend compared to Q4 rates. However, some regional markets including Gdynia, Antalya, Tromso, Heraklion, and Oulu are still going to see double-digit increases. Overall, we are seeing European occupancy levels trending higher than in 2023.
Rail pricing trends are varying across Europe, with Southern European countries seeing a moderate upward trend while Northern European countries are faced with stronger fare increases. Germany and the UK are seeing the largest year-over-year fare increase, driven by rising regulated rail fares in the UK and high demand for the so-called “Germany ticket” that allows local and regional train travel across Germany for just 49 euros a month. We also expect to see a slight increase in rental care daily rates as demand slows down. We see car rental companies prioritizing conservative fleet planning to maintain a minimal gap between customer demand and vehicle availability.
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 Q1 2024 and Q1 2025, 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
With leisure demand slowing down, corporate clients are taking center stage again. As you approach negotiations it’s important that you can show your value to airlines. Maximize your tracked spend by prioritizing traveler compliance to reduce off-channel bookings. Keep in mind, that any potential discounts will only apply to base fares. New environmental, GDS and fuel surcharges are now making up close to one-fifth of the airline ticket price on average. This means it’s critical to consider the total contract value beyond discounts. You should evaluate your supplier’s impact on key priorities like traveler wellbeing and sustainability. By assessing the total value of benefits and services provided by your preferred airlines, you can determine the best “bundles” of fares and services for your program.
Hotel program focus areas
Now is a great time to focus on boosting the traveler experience. If your rates aren’t competitive or the booking experience in the online booking tool (OBT) is not up to par, your travelers are going to book elsewhere. Take time to audit your rates, ensuring your negotiated rates are still competitive and consistently available to travelers. If you find properties that aren’t adding value to your program, don’t be afraid to renegotiate rates to better align with the current market. Beyond rates, enhance the traveler experience by logging in to optimize your OBT—review sort order, booking limitations, rates, custom messaging, and program preferences.
Interested in the full Advito Travel Price Index Report? Access your copy of the full report with a breakdown of each region here!