Survey: Business Travel Prices to Keep Rising in 2023

According to the “2023 Global Business Travel Forecast” published by CWT and the Global Business Travel Association (GBTA), global travel prices are predicted to continue to increase in the remaining months of 2022 and throughout 2023.

Rising fuel prices, labor shortages and inflationary pressures in raw material costs are the primary drivers of the expected price growth, according to the report, which uses anonymized data generated by CWT and GBTA, with publicly available industry information, and econometric and statistical modeling developed by the Avrio Institute.

“Demand for business travel and meetings is back with a vengeance, of that there is absolutely no doubt,” said Patrick Andersen, CEO of CWT. “Labor shortages across the travel and hospitality industry, rising raw material prices, and greater awareness for responsible travel are all having an impact on services, but predicted pricing is, on the whole, on par with 2019.”

Added Suzanne Neufang, CEO of GBTA: “What we are seeing now are multiple factors coming into play when corporate travel buyers and procurement officers model their travel programs. This eighth joint annual forecast marries statistical travel data and trend analysis with macroeconomic influences to provide a cornerstone reference point for their corporate business travel planning ahead."

The world economy shrank 3.4 percent in 2020 in one of the worst declines since World War II. Service sectors, including travel and hospitality, were hit especially hard, but the global economy recovered briskly, rising off the lows of 2020 and increasing 5.8 percent in 2021. Economic growth is moderating as the recovery lengthens, although another recession is a growing concern. The current base-case scenario for 2022 is for 3 percent growth, followed by 2.8 percent growth in 2023. Cautionary notes in the “2023 Global Business Travel Forecast,” highlight the three main forces exerting pressure on the economy and the business travel industry. These include Russia’s invasion of Ukraine coupled with other geopolitical uncertainties, inflationary pressures that are pushing costs higher, and the risk of further COVID-19 outbreaks that could restrict business travel.

Conversely, with businesses ranking sustainability among their top priorities and reflecting the accelerated importance of combating climate change, the report highlights greater visibility at the point of sale for greener travel options, besides carbon foot-printing, and environmental impact assessment is an opportunity for the travel industry to actively assist in making responsible choices.

Prices have increased in all regions across most categories of spend, fueled by pent-up demand, a desire to build company culture and an uncertain economic outlook. The cost per attendee for meetings and events this year is expected to be around 25 percent higher than in 2019, and it could rise a further 7 percent in 2023.

Alongside pent-up demand, corporate events are competing with many other types of events that were canceled in 2020. With many companies having given up office space during the pandemic in favor of remote working, they are now booking meeting spaces when staff gather in person, further fueling demand.

Shorter lead times for events, varying from one to three months versus six to 12 months, are also contributing to this perfect storm, perhaps underscored by corporate concerns that the situation they face today could change rapidly. This is particularly noticeable within Asia Pacific, which has been slower than other regions to re-open post-pandemic, with ongoing restrictions in China prompting clients to make sure their events can go ahead, and as quickly as possible.

Business travel airfares fell over 12 percent in 2020 from 2019 followed by an additional 26 percent dip in 2021. Economy ticket prices fell over 24 percent from 2019 to 2021, while premium tickets fell 33 percent. Prices are likely to rise 48.5 percent in 2022, but even with this steep price increase, prices are expected to remain below pre-pandemic levels until 2023. Following an increase of 48.5 percent in 2022, prices are likely to rise 8.4 percent in 2023. 

Rising demand and continued price rises on jet fuel, which have seen prices more than double in some markets to over $160 per barrel according to S&P Global, are putting upward pressure on ticket prices.

Premium class tickets comprised over 7 percent of all tickets purchased in 2019. The share of premium class tickets fell to 6.5 percent in 2020 and to 4.5 percent in 2021 but have started to rise in 2022. Through the first half of the year, premium tickets made up 6.2 percent of all tickets purchased. A rising share of premium class tickets will result in higher average fares as average ticket price comprises economy and premium.

International and cross-border bookings are recovering across most regions which will result in a higher share of international ticket bookings and a corresponding higher average ticket price despite uncertainties caused by the war in Ukraine. Following two years of minimal to no expenditure, business travelers are likely to be willing to spend more on tickets, especially as availability reduces due to labor shortages. This upward trend is largely due to widespread vaccine rollouts and border re-openings.

Hotel prices fell 13.3 percent in 2020 from 2019 and a further 9.5 percent in 2021; however the report expects them to surge 18.5 percent in 2022 followed by an 8.2 percent lift in 2023. Hotel prices have already eclipsed 2019 levels in some areas such as Europe, the Middle East and Africa, and North America and are expected do so globally by 2023. The raise in rates is likely driven by an accelerated recovery, coupled with continued capacity constraints. Hotel rate increases were initially driven by strong leisure travel in 2021 but group travel for corporate meetings and events is improving and transient business travel is similarly gaining healthy pace, putting further pressure on average daily hotel rates.

Global car rental prices fell 2.5 percent in 2020 from 2019, before rising 5.1 percent in 2021. Prices are expected to increase 7.3 percent in 2022, hitting new highs, and rise a further 6.8 percent in 2023.

The vehicle industry remains capacity constrained and rental agencies which reduced fleet sizes in the wake of the pandemic, have not yet fully recovered–due in part to component shortages and supply chain disruptions that have reduced global auto production.

Rental agencies have reverted to buying used vehicles to increase fleet sizes and are keeping their vehicles longer. Some agencies are also purchasing vehicles from auto-makers outside of their historically supported brands.

Skyrocketing prices, vehicle shortages and the need for visibility into carbon emissions from door-to-door are driving corporate travel managers to factor ground transport into full trip planning from the beginning. This is especially true when factoring in the inclusion of electric vehicles, and while widespread adoption may still be a few years away, personal preference should not be underrated.

Source: GBTA

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