‘Trump effect’ to hit business travel growth in 2017
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After an uneven 2016 that saw only limited increases in overall pricing, the business travel outlook for next year looks to be similarly subdued, with flat to moderate rate increases expected globally across air, hotel and ground transportation, according to Global Business Travel Forecast 2017 by American Express Global Business Travel.
The continued slowdown of the Chinese economy and depressed oil prices, the United Kingdom’s impending departure from the European Union, growing populist politics in countries such as the US and increased security concerns in many countries have together created a higher level of uncertainty in the global marketplace. It remains to be seen how this will impact business travel over the next year.
Additional global highlights include:
Air: Global demand for air travel remains at a record high; persistently low fuel prices and strong competition will help keep airline fares in check.
Hotel: Hotel performance will improve moderately and prices will remain flat in most regions with the exception of Latin America, where rates will decline slightly, and Asia Pacific, where the impact varies greatly by country.
Ground: Ground transportation has undoubtedly felt the impact of new industry players and rates should remain flat as capacity continues to exceed demand.
Rodolfo Elizondo, VP and Head of Global Business Consulting at American Express Global Business Travel (GBT), believes that in this period of political and economic uncertainty, companies and business leaders will welcome news that the cost of business travel may, at worst, endure only modest increases. “Travel managers should focus on the things they can control, like demand management, compliance and traveller satisfaction to reduce risk and increase savings,” he said.
In Europe, airlines continue to face significant headwinds in the form of lackluster economic performance, security concerns, long-haul pressure from Gulf carriers and the growing presence of low-cost carriers on short-haul routes. With low-cost carriers looking to continue their aggressive expansion efforts in 2017, airfares will stay level with 2016. In the UK, the currency devaluation following Brexit has had the short-term effect of making outbound travel from the UK more expensive. However, the medium to long term impact of Brexit on business travel will not be known until the UK government starts negotiations with the EU, which are expected to begin in Q2.
Political and economic uncertainties in Europe are flattening hotel demand but the overall lack of new supply should help sustain mild rate increases. Despite speculation that the UK would see prices rise on higher demand from value-seeking tourists and domestic vacationers forced to stay at home, rates are staying level and should remain so through 2017. In European countries where demand growth is strong, such as in Ireland or Russia, price increases should be similarly robust. By contrast, the strong demand experienced in Dubai and Abu Dhabi should result in only minimal price increases given the significant amount of new construction in those cities.
EMEA Airfare and Hotel Rate Forecast
Air Short-Haul Economy | Air Long-Haul Business | Hotel | |
France | -1.5% | -1.0% | -0.3% |
Germany | 3.0% | 1.5% | 0% |
Poland | 4.0% | 3.0% | -0.4% |
S. Africa | -0.5% | 2.0% | -1.0% |
U.A.E. | 1.3% | 0.5% | 0% |
U.K. | -2.0% | -3.0% | 0.2% |
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