With weighty uncertainty hanging over the European economy, if not that of the whole world, predicting what is going to happen next year is a perilous business, writes Stanley Slaughter.
Carlson Wagonlit Travel (CWT) in its 2012 Global Travel Forecast is the latest to try. (Unfortunately for Carlson it has chosen this unsure time to expand its forecast from North America to all regions of the globe).
But the broad message it is conveying differs little from previous efforts, like that recently of Advito. Prices are rising and travel buyers are in for a tough time. The pendulum is beginning to swing against them and a seller’s market is taking shape.
To put CWT’s forecast in a nutshell, all major suppliers – airlines, hotels, ground transport and meetings and events costs – are likely to increase their prices. The size of the rises depends on which region of the world is considered and here the variants can be significant.
Unsurprisingly, the price rises are predicted to be higher in regions where the economy is on the up. In the “thriving” market of Asia Pacific, CWT says that airline prices will rise by between 3.1 and 3.8 per cent thanks to a “mix of legacy airlines and a growing group of low-cost carriers competing for travellers, holding down fares in the region.”
Inreases in hotel rates are expected to be more modest with a 1.9 to 2.1 per cent rise forecast for the first six months of 2012.
But drill down into the figures and a slightly different picture emerges. In China where the GDP is expected to grow by 9.6 per cent next year, air fares are likely to go up by between 4.7 and 6/9per cent, more than anywhere else in the region and despite a rise in the number of airlines flying to and from the country.
Confusingly, CWT predicts that hotel prices in China are likely to fall in H1 by up to 4.2 per cent, no doubt a legacy of the rapid rise in the number of hotel rooms.
Just south in Hong Kong, a destination much favoured by European bankers, the reverse is predicted. Air fares, says Carlson, will be relatively stable with a small rise of up to 1.4 per cent, but hotel prices in H1 will increase by between 5.1 and 9.2 per cent – a substantial rise in anyone’s language.
Sadly CWT offers no figures for India, a country plagued by a shortage of hotels and whose airlines appear to be in deep trouble, but which nonetheless is expected to see GDP rise by 9.1 per cent next year.
The second growth area is Latin America which CWT predicts will “experience some of the most substantial price increases of any region across the main areas of travel spend.” Air fares are set to rise by around 5.8 while per cent, average daily rates in hotels could increase by 9 to 11.8 per cent in H1 and 10.1 to 12.2 per cent in H2.
But again, as CWT admits, “a closer look reveals disparate conditions by country.” Colombia, not a country near the top of most business travellers “must go to” list, will see air fares rise by up to 7.8 per cent next year, while in Argentina and Brazil, two more stable and growing countries, the rises are likely to be up to 7.8 per cent and 6.9 per cent respectively.
But it is in the arena of hotel rates that Latin America raises eyebrows. In Argentina in H1, they will go up by up to 10.1 per cent and by up to 9.1 per cent in H2. It is worse in Brazil where the rises predicted are an astonishing 21 to 24.3 per cent in H1 and an eyewatering 28.1 to 34.1 per cent in H2. This many not be that good for future growth.
In the continuingly troubled economy of North America, CWT predicts more modest increases of 3.4 to 4.1 per cent in air prices and 2.4 to 3.1 per cent in hotel prices for H1 and 2.6 to 3.4 per cent in H2. With the exception of New York, where hotel prices seem always to be high, there is still some purchase for travel buyers.
The same can be said of Europe, Africa and the Middle East where the overall figures of a 2.1 to 3.7 per cent increases in air fares and 0.2 to 0.9 per cent for hotel rate rises disguise significant local variants. Regrettably CWT only offers comparative prices for eight European countries, some on the rather small side. It is also such a disparate area that the value of lumping it all together is increasingly invalid.
For example, while CWT predicts that inflation will fall in Europe in 2012, it says it will rise in Russia by 15 per cent. It is unlikely that Saudi Arabia or Abu Dhabi see themselves in the same region – economically – as Greece.
The picture is sufficiently volatile in Europe as to cast shadows of doubt on any forecasts. Even with the UK staging the Olympic Games next summer amid dire predictions of huge price increases for hotels, the picture remains confused.
For example, CWT predicts that the increase in air fares will be highest in Germany, at up to 4.6 per cent, followed by Denmark with up to 4.3 per cent and then the UK with up to 4.1 per cent. For hotels the picture is slightly clearer, with the UK likely to experience H1 increases of up to 4.3 per cent and H2 ones of up to 4.9 per cent. But this is better than the 7.2 per cent and 4.8 per cent respective rises for France.
A better forecast might be cloudy. It is by no means clear what will happen next year in Europe. Much depends on a solution to the Eurozone crisis and to what happens to the currently flatlining UK economy.
But there is an underlying feeling that suppliers, after a year or two in the doldrums, are out to increase prices. Not massively, unless you are a Brazilian hotel owner, but significantly. These are not good days for the buyer.