With all of the ever-changing factors impacting corporate travel in the past three years, it’s been increasingly difficult to produce a reliable travel industry forecast.
Until the industry has fully recovered from the COVID pandemic and business travel has several quarters of regular activity, even most algorithms will have trouble looking into the future to make accurate predictions. To combat this uncertainty, we’ve decided to produce a quarterly travel price index report for air and hotel.
Market snapshot: North America
Air travel demand continues to be strong on both domestic and international routes in North America, driven primarily by intercontinental leisure travel. The corporate travel recovery is trending upward as well, now at 80% of 2019 levels. Ticket prices versus the previous quarter have increased or remained flat to every destination out of North America, with the exception of Asia. Pent-up demand has returned to the re-opening Asian destinations, and more inventory has led to a decrease in prices in Q2 versus Q1 of this year while remaining above Q2 2022 levels. In the hotel space, most increases in the best available rate (BAR) have slowed in the major markets in the US and Canada. The overall regional increase of 6% in Q2 2023 versus the same period in 2022 is being driven primarily by rate increases in Toronto, Mississauga, Richmond, Chicago, Washington, Phoenix, Seattle, Tampa, and New York.
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. Our first index was released in Q4 2022, and after a very positive response from clients looking to understand pricing trends in the short- to medium-term, we have produced a similar report for Q1 and now Q2 of this year.
The full report (currently only available for Advito clients) 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 Q2 2022 and Q2 2023. 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 Summer.
Air program focus areas
There are several areas to focus on in your air program to ensure that it is set up for success heading into the Summer of 2023. Pay special attention to current travel booking behavior on key travel sectors and compare it with the latest market trends for the upcoming weeks. Also be aware of inflation. Airfare inflation is everywhere, and your negotiation power has likely decreased. Take a closer look at your travel policy to help identify opportunities to achieve some cost savings. You’ll also want to ensure that you’re taking changes in airline distribution into account when assessing your program needs and carrier mix.
Hotel program focus areas
In your managed hotel program, it’s essential to understand demand across your key markets to learn what factors are influencing hotel pricing strategies. To combat rate volatility, you can time your sourcing engagement differently. Think about shifting to an off-season sourcing strategy to give you more visibility into your travel pattern and forecast. That way, you can approach negotiations armed with more information in hand. You’ll also want to ensure that you’re engaging business travelers, encouraging them to book in program and in policy, and give them a great experience so they become advocates for the program.
Interested in the full Advito Travel Price Index Report? Reach out to your Consultant today. Not an Advito client? Get in touch with us, we’re ready to help you elevate your travel program.