Erin Singleton, Senior Director, Marketing
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.
A prediction made in January will likely prove to be wildly inaccurate by June. 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.
What is an Index?
First, it’s important to note that this 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 (in this case, we’re still comparing with Q1 2019) 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.
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 Q1 2019 and Q1 2023. The result is a reliable report based on published airfares and hotel rates that does not make long-term predictions.
Market snapshot: Asia
After nearly three years of an aggressive “Zero-COVID” approach to the pandemic, China has lifted restrictions and is poised for the dramatic recovery of their travel industry. Airfares to and from Asia are increasing due to high travel demand. This rapid return of demand, combined with tight supply, is resulting in double-digit fare increases in both business and economy class tickets on almost all travel sectors from Asia. In the hotel space, while most markets in Asia have still not met pre-pandemic occupancy levels to date, China, Singapore, and India are all showing significant rate increases versus 2019.
How does the index help?
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 kick-start the year.
Top 4 focus areas for your air program
- Asses your current negotiated routes – Identify where there are opportunities to increase discount coverage and determine where you’ll have strong negotiation power with airlines.
- Monitor fare & surcharge increases – The supply shortage has had a significant impact on airfares. Monitoring airfare trends, surcharges (fuel and distribution) and booking class availability is critical prior to negotiating with carriers.
- Don’t ignore sustainability – Consider how sustainable your preferred airlines are. If they don’t stack up, now is a great time to reevaluate which airlines should be part of your program.
- Integrate traveler wellness – It’s important to balance sustainability initiatives with employee wellness considering criteria like cabin class, jetlag factor, flight duration and layovers, and risk level.
Top 4 focus areas for your hotel program
- Focus on rate increases and historical trends – Many properties are viewing 2023 as the year to make up for not increasing corporate rates since 2019. Focusing on hotels where leverage and volumes are strong will minimize the impact.
- Be selective in choosing which properties to invite into your program – Properties are declining to participate in RFPs because the value of corporate business is at an all-time low given the relatively high leisure demand. Focus on volume consolidation, and the property’s share of the market when it is high and the potential for growing to the overall share when it is low.
- M&E travel volumes are outpacing 2019 levels – If your M&E volumes are following this trend and have returned to 2019 levels or higher, this is the prime opportunity to consolidate M&E and transient spend and leverage all hotel category spend for negotiating both M&E and transient contracts.
- Continue to evolve ESG approach – Start small if you have yet to start. Choose a handful of environmental and social metrics that are of value to your company and travelers. Ask those questions of hotels you solicit and use them as part of your decision-making process. Then tell your traveler base what you have done via an internal marketing campaign or designating these hotels in your directory and/or booking tools.
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.