Hotel rates are expected to increase 13 per cent globally in 2022 and a further 10 per cent in 2023 according to the Global Business Travel Forecast published today by CWT and the Global Business Travel Association.
The seventh annual edition of the forecast also identified airfare rises of 3.3 per cent next year and 3.4 per cent in 2023, and increases in ground transport costs of 3.9 per cent in 2022 and an additional 3 per cent in 2023.
The report attributed rising business travel costs to a number of factors including growing post-pandemic demand, capacity constraints, sustainability targets and increasing labour and fuel costs.
Macroeconomic forces, government policy and Covid-19 protocols will continue to impact future pricing, while global economic growth expectations – of 5.9 per cent in 2021 and 4.9 per cent in 2022 – will “help accelerate the recovery of business travel”.
“While the best-case scenario for 2022 is for further recovery of business travel across all areas, not all markets, nor all categories, will recover at the same pace, so business travel managers will need to understand what to expect as we look at the year ahead,” said CWT chief executive officer Michelle McKinney Frymire.
The forecast is based on statistical models developed by GBTA and anonymised transaction data from CWT’s global client portfolio over the past ten years. The organisations last issued the forecast in 2019.
Double-digit hotel rate rises
Global hotel rates collapsed 8.3 per cent in 2020 and a further 17.7 per cent in 2021, with prices as of Q3 this year still down around 25 per cent on 2019 levels. However as travel recovery gathers pace, average rates globally are expected to rise 13 per cent next year, to $135.66, and a further 10 per cent in 2023, to $149.25 – still down from 2019's average rate of $158.93.
In Europe, rates are expected to rise less steeply than the global average, increasing 10.4 per cent in 2022 (to $132.97) and 7.6 per cent in 2023 (to $143.02). The average hotel rate in Europe in 2019 was $157.15.
Upscale hotels are expected to see higher occupancy levels – and therefore higher room rates – as business travel returns, while larger corporate meetings and events are expected to return in 2022 with average attendee numbers having dropped from 42 in 2019 to 24 in 2021.
See chart below for more details.
Moderate increase in airfares
Rising airfares are expected in the next two years (3.3 per cent in 2022 and 3.4 per cent in 2023) as airline capacity remains tight on its path back to pre-pandemic levels. As a result, business travellers will be competing for limited capacity with leisure travellers which will continue to exert pressure on airfares, says the report. If demand increases faster than capacity returns, price increases could outstrip the projected increases, it warns.
Rising car rental costs
Car rental rates have been the least volatile of the key travel categories during the pandemic and only moderate rises are projected in spite of several challenges currently facing the sector, principally the limited supply of new vehicles.
Having dropped only 2 per cent in 2020 and recovered 1.2 per cent this year, rental rates are expected to rise 3.9 per cent in 2022 and an additional 3 per cent in 2023.