As we head into the second half of 2023, airfares and hotel rates continue on their upward trend.
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: Europe
We’re anticipating dramatic airfare increases from Europe in all travel sectors in Q3, including domestic, intra-Europe and intercontinental routes. The 2022 summer travel season was upended due to significant labor shortages, and we anticipate a similar trend heading into this year’s peak season due to the impact on yields coupled with carrier capacity restraints. The industry will struggle to absorb a very strong leisure demand. Airfares from Europe to Asia and the Southwest Pacific are finally starting to cool off, with decreases across the board versus the same period last year. Hotel rates in the region are following a similar trend. Several countries are driving the regional best available rate (BAR) increases, including Turkey, Iceland, Belgium, Poland, and Greece, among others. Recession fears and budget constraints may drive rates down as get into the second half of 2023.
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, Q2 and now Q3 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 Q3 2022 and Q3 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. Now is the time to make a full assessment of your current air program. This is crucial to determine how to modify your needs to build the most robust program possible. Take note of significant changes to airline distribution and assess the impact on your air spend to choose the content strategy and mix of carriers that works for you. Focus on sustainability when considering your preferred carrier mix. Finally, demand is high, and airfares are rising. Now is the time to take a closer look at your travel policy to help identify opportunities to achieve some cost savings.
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 help improve your negotiation leverage. To combat rate volatility, you can time your sourcing engagement differently and adopt a multi-source content strategy. Think about shifting to an off-season sourcing strategy to give you more visibility into your travel pattern and forecast. Utilize technology to your advantage, to automatically track, monitor, and rebook hotels to drive savings. 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.