Cwt 2012 Travel Price Forecast

8/3/2019 Cwt 2012 Travel Price Forecast

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CWT Perspectives:2012 Travel Price ForecastCWT Perspectives:2012 Travel Price ForecastOctober 2011October 2011



AcknowledgementsThis global forecast of 2012 prices for airlines, hotels, ground transportation suppliers, and meetings and events providers, has beenproduced by CWT Solutions Group consultants worldwide. It was conducted in partnership with the CWT Travel Management Instituteand with the assistance of Professor Connan Snider of the University of California at Los Angeles Department of Economics.

The authors greatly acknowledge the contributions of the following CWT teams worldwide: CWT Solutions group CWT Meeting and Events CWT Corporate Marketing and Business Intelligence

Please consider the environment before you print this publication in part or in full.All monetary references in this publication denote U.S. dollars.Copyright © 2011 CWT



CWT Perspectives: 2012 Travel Price Forecast | 3

Welcome

…to Carlson Wagonlit Travel’s first global forecast, where we project 2012 supplier prices for airlines, hotels,

ground transportation providers, and meetings and events suppliers. While CWT has produced a North American

forecast for the past several years, the piece you’re about to read provides projections for every region of theworld, as well as country-level expectations for those markets to which CWT clients most frequently travel.

This information is intended to inform your negotiations with travel suppliers, and serve as a supplement to

your organization’s efforts to manage travel spend more effectively. To help us deliver against that goal, we’ve

once again enlisted the assistance of a standing contributor to CWT’s North American forecast, Professor

Connan Snider of the University of California at Los Angeles’ Department of Economics, to supplement our

team’s corporate travel knowledge with his expertise on macroeconomics, statistical modeling, forecasting,

and price indexing.

Following our analysis, and perhaps not surprisingly given year-over-year increases in business travel demand

worldwide, CWT confirms that prices in most geographic areas and for most categories of spend are expectedto rise in 2012, with the most substantial increases to occur in the booming Latin America region. Even so,

economic uncertainty continues in some parts of the world and has resurfaced in others, prompting increasing

questions on exactly what 2012 holds in store for organizations and, by extension, for business travel. Therein

lies the challenge in forecasting as far as 14 months out – only time can truly reveal what the future will

bring. That is why CWT commits to continue monitoring the many developments that impact travel – from

the performance of local economies to the fluctuating price of oil and everything in between – and update

our forecast projections as necessary in the coming months to ensure you have access to the most updated

information possible.

Speaking of updates, hopefully you’re well aware of the many channels by which CWT provides ongoing

information and advice to help you anticipate and respond to developments in our industry, including

CWT Vision, CWT ViewPoints, CWT Industry Watch, research conducted by the CWT Travel Management

Institute, and much more. In fact, this forecast is just the first in a 3-part CWT Perspectives series that focuses

on 2012 and examines what managing travel will involve in the coming year. Keep an eye out for the second

CWT Perspectives piece on key industry trends in November, and for the third component, CWT’s annual Travel

Management Priorities study, which will be released in January 2012 by the CWT Travel Management Institute.

Please contact your CWT representative with questions or comments about any of these publications, or to be

subscribed to those you may not yet receive.

We hope you enjoy reading CWT’s global forecast for 2012, and wish you continued success as you wrap up

your 2011 travel program and finalize plans for next year.

Nick Vournakis Christophe Renard

Vice President, CWT Solutions Group Vice President, Corporate Marketing

& Business Intelligence

Christophe Renard

Nick Vournakis



4

CWT's global forecast for 2012

All projections reflect anticipated price changes measured againstprices for the same time period in the previous year.

North America

H12012

H22012

+3.5 to +4.1%

+2.4 to +3.1%

+2.6 to +3.4%

-1.0 to +2.5%

GroupSize

Cost perattendeeper day

+1.0 to +4.0%

+5.5 to +6.5%

Latin America

H12012

H22012

+5.7% to +5.9%

+9.0% to +11.8%

+10.1% to +12.2%

-2.2% to +5.6%

Europe,the Middle East,

and Africa

H12012

H22012

GroupSize

Cost perattendeeper day

-3.0 to +0.0%

-5.0 to -6.0%

+2.1% to +3.7%

+0.2% to +0.9%

+0.1% to +0.8%

-1.9% to +2.9%

+3.6% to +4.2%

Asia Pacific

H12012

H22012

+3.1% to +3.8%

-1.9% to +2.1%

-0.9% to +0.0%

-1.7% to +3.9%



Forecast methodology


The projections in CWT’s 2012 Travel Price Forecast were formed from the combination of a.) a statistical model that evaluates

historical price behavior and forecasts future price references; and b.) the market-specific expertise of CWT personnel worldwide.

Macro-economic information and forecasts used were sourced from IHS Global Insight, the International Monetary FundResearch Department, and the United Nations. All monetary references are in U.S. dollars.

Projections were calculated based on the transaction data of CWT’s global client portfolio, including their travel footprints and

patterns, as indicated below:

Air transactions: Q1 2006 – Q2 2011

Car rental transactions: Q1 2007 – Q2 2011

Hotel transactions: Q1 2006 – Q2 2011

Rail transactions: Q1 2008 – Q1 2011

Likewise, key macroeconomic and per-country indicators, such as current and expected gross domestic product (GDP) growth,

unemployment rates, and crude oil prices, were used in CWT’s statistical model, which together with CWT clients’ average price

index were used as the foundation for the quantitative research conducted for this report.

CWT’s analysis confirms that cyclicality in the travel industry plays a significant role in pricing and therefore, our 2012 estimates

have been broken down by the first and second halves of the year where possible to produce the most accurate and applicable

information for travel buyers. Additionally, macroeconomic variables have proven to be of statistical significance in determining

prices in the industry; therefore, the following observations are also reflected in CWT’s forecast projections:

In the United States, on average an approximately 1% increase in GDP over its value in Q12007 results in a 1.3 point

increase in the price index

On average, a 1% decline in unemployment leads to a 1.04 point increase in the price index

On average, a $10 increase in the price of a barrel of oil leads to a 0.7 point increase in the price index For U.S. markets, a 1% increase in airline capacity (i.e. available seat miles) leads to a 0.6 point decline in the price index

Cushing per barrel oil price worldwide

$120

110

100

90

80

70

60

50

40

30

J a n F e b M a r

A p r M a

y J u n J u l A u

g S e

p O c t

N o v

D e c

2009

J a n F e b M a r

A p r

M a y

J u n J u l A u g

S e p O c

t N o

v D e

c

2010

J a n F e b M a r

A p r

M a y

J u n J u l A u g

S e p

2011

Cushing oil prices originate from Cushing, Oklahoma, in the United States, a major oil supply and price settlement hub.



6

Global economic outlook

Economic performance and expectations vary greatly worldwide and are further detailed in the following pages. In general,

global economic growth has been slowing down, with weakness from the most developed nations having significant impacts

everywhere despite strong performance from developing nations and their emerging economies. In fact, according to theUnited Nations, of 35 developed economies in the world, five are expected to show decline in GDP per capita in 2011. Of 107

developing countries, 50 are expected to show growth of 3% or more in GDP per capita.

A weaker than anticipated recovery of the world economy, specifically for developed countries, is unfortunately far from being

out of question, as continued high unemployment rates, sovereign debt distress, fragility of financial markets and inadequate

economic policy responses can potentially hurt already weak business and consumer confidence even more.

High global unemployment rates continue and are contributing to the ongoing economic uncertainty: more than 30 million jobs

were eliminated during the economic crisis, and according to the United Nations 22 million jobs still must be added to return

to flat levels, which could take up to five years. Youth and young adults currently are particularly impacted by lengthy periods

of unemployment.

Public debt of developed countries is expected to rise to more than 100% of GDP in the next few years; in fact, fiscal austerity

is considered to be one of the greatest threats for the emergence of public debt distress.

Overall economic inflation doesn’t seem to pose a general concern around the world. In fact, inflation is expected to remain

relatively low worldwide during 2011-2012, except for a number of developing economies in Asia.

Overall, global gross domestic product (GDP) is estimated to have grown just over 3% in 2011, with another 3.5% expected

for 2012.

Source: United Nations’ World Economic Situation and Prospects 2011: Global outlook report

Growth of the world economy, 2004-2012

2004 2005 2006 2007 2008 2011 2012

O p t i m i s t i c

P e s s i m i s t i c

2009 2010

-3

-2

-1

0

1

2

3

4

5

P e r c e n t a g e

c h a n g e

+4.0

+3.6

+4.1

+4.0

-2.0

+3.6

+3.5

+3.1

+1.6




It’s no surprise that the Asia Pacific (APAC) market is thriving, leading

the way in many economic indicators and correspondingly, in

business travel volumes. The region did not feel the effects of therecent economic downturn for as long as other parts of the world.

In fact, according to the United Nations, by the end of Q1 2010 East

Asia had already returned to unemployment levels in line with what

had been normal before the economic downturn. GDP in the region

is expected to grow 0.5-1.5% quarter-over-quarter in the next year,

with the exception of China and India, whose exports now exceed

pre-recession levels, and where expected 2012 GDP growth is 9.6%

and 9.1%, respectively. China is in a particularly strong economic

position given its more than $2.5 trillion in foreign exchange reserves.

Unemployment will steadily decrease for most APAC countries in 2012,

hovering in the 3-6% range with the exception of New Zealand, which

will top out at 7.5% unemployment in mid-2012 before it begins to

decrease. The only APAC country expected to experience declining

performance overall is Japan, which will continue to be challenged

into the first part of 2012 by the severe natural disasters it suffered in

mid-2011, as well as by ongoing deflation and increasing debt,

ultimately resulting in GDP growth of 2.3%.

The airline landscape throughout APAC is populated with a dynamic mix

of legacy carriers, and a growing group of low-cost carriers that have

been applying pricing pressure that affects overall fares in the region,whether for business or leisure travel. Competition is fierce, made even

more so by Middle Eastern carriers who are increasingly providing service

to the APAC market. These wealthy airlines are able to invest heavily in

their business- and first-class products, and are therefore attractive to

APAC-based travelers in need of service to the Middle East, or to other

parts of Europe with the Middle East as the gateway.

APAC’s business hubs boast the highest hotel occupancy rates in the

world, presenting serious challenges for managed hotel programs to

secure available rooms on peak nights of the week, much less obtain

negotiated corporate rates. For example, according to Smith Travel

Research data, Hong Kong leads the region – and the globe – at

82.3% average occupancy, with Sydney closely following at 82.2%.

Given that, Hong Kong will experience some of the region’s highest average daily rate (ADR) increases in the first part of 2012,

reaching more than 9% in the first part of 2012 before leveling off for the remainder of the year. Even so, strong supply growth

across APAC will keep overall ADR growth in the region more modest than one might expect.

Car rental rates in APAC for 2012 will be nearly flat in Australia, with small increases in New Zealand as well. Rental volumes across

Australia have shown growth, with a clear difference between more “standard,” city-based rentals, and more custom, longer-term

rentals used by travelers in the mining and resources industries to travel to more remote areas of the country.

Asia Pacifi cAIR

+3.5% to +6.8%

+4.7% to +6.9%

+1.2% to +1.4%

Australia

China

Hong Kong

+0.1% to +2.7%

+3.2% to +3.9%

+3.4% to +4.5%

Japan

Singpore

New Zealand

CAR RENTAL

Australia

New Zealand

-0.5% to +0.4% -1.7% to +2.0%

+0.2% to +1.5% +1.5% to +3.3%

H1 2012 H2 2012

HOTEL

Australia

China

Hong Kong

Japan

Singpore

New Zealand

+4.1% to +4.9% +4.4% to +5.1%

-4.2% to -2.9% -3.9% to -3.2%

+5.1% to +9.2% +0.6% to +1.3%

+3.8% to +4.8% +0.5% to +1.0%

+4.5% to +4.7% +2.0% to +3.3%

-3.0% to +0.7% -0.4% to +5.8%

H1 2012 H2 2012

Additional country-level projections across travel segments for Asia Pacific.

Hotel ADR projections by crown category for Asia Pacific.


http://www.carlsonwagonlit.com/en/countries/us/Pdfs/APAC_additional_projections.pdf



http://www.carlsonwagonlit.com/en/countries/us/Pdfs/APAC_hotel_crown_category.pdf







8

Economic uncertainty is apparent throughout much of Europe, the

Middle East, and Africa (EMEA), which is creating an expectation for

much flatter overall pricing across the main areas of travel spend for2012 in this region versus any other. Overall inflation in Eurozone

countries and the United Kingdom will be low in 2012, with close to

flat GDP growth. This can be contrasted with the significant inflationary

increases Russia is experiencing, which are expected to reach 15%

year-over-year growth in early 2012 before beginning to decline.

Unemployment will range from 6-10% across EMEA in 2012, with

the exception of South Africa and of Spain, where unemployment

is expected to reach 30% in mid-2012 before the trend begins

to reverse. Efforts to improve the economic challenges in Greece,

Portugal, Spain, and Italy are not expected to produce improvements

next year, meaning these countries will remain in recession or further

decline; for example, Spain’s current unemployment sits at more than

20%. Germany, often considered the economic engine of the region,

is showing some vulnerability as well with GDP growth of just 1.7%

anticipated in 2012, though according to the United Nations it is

one of the few countries in the world experiencing observable labor

market improvements. Finally, the United Kingdom will of course host

the 2012 Summer Olympic Games, which should yield significant

benefits for the country’s local economies. This is also reflected in

CWT’s projections that the UK will see some of EMEA’s high price

increases in hotel and car rental.

Given all of this, perhaps not surprisingly airlines throughout EMEA are

expecting only modest, low single digit gains in ticket prices for 2012.

This despite the fact that the region’s airlines have been disciplined about

managing capacity, removing it during the economic downturn and

withholding it in many markets even as demand has returned. Further,

while fuel surcharges have emerged around the world in the face of oil

price volatility in recent months, they are particularly prevalent on airfares

offered by EMEA-based carriers, and can often rival the price of the fare

itself, substantially increasing the overall cost to fly for travelers.

Depending on the country, 2012 ADRs for EMEA hotels will range

from dropping slightly below previous quarter levels, to increasing

in the mid- to high-single digits. Hotel rates vary drastically by

market depending on local demand, and therefore travel buyers can

expect particularly high ADRs in EMEA’s highest occupancy cities. In

fact, Smith Travel Research indicates London and Edinburgh have

experienced some of the highest occupancy rates in the world to

date in 2011, topped only by Hong Kong and Sydney. While space

to conduct new construction is limited throughout much of EMEA,

continued supplier consolidation is expected, whereby national orglobal hotel brands bring independently owned properties into their

portfolios. Even so, EMEA in particular has been and will continue to

be home to many independent hoteliers. It is important to note that,

Europe, the Middle East, and Africa

H1 2012 H2 2012

CAR RENTAL

France

Germany

UK

Spain

-1.6% to +2.1% -3.4% to +0.4%

-1.6% to +1.2% -1.0% to +0.2%

-2.3% to +3.0% +1.6% to +2.0%

-0.4% to +4.6% -2.5% to +5.9%

AIR

+ 2.1% to +3.4%

+3.1% to +4.3%

+1.0% to +3.2%

+2.1% to +3.3%

Finland

Belgium

France

Denmark

Germany

UK

Spain

Sweden

+ 2.4% to +4.6%

+1.1% to +3.2%

+1.5% to +3.2%

+2.2% to +4.1%

HOTEL

H1 2012 H2 2012

Finland

Belgium

France

Germany

UK

Spain

Sweden

Denmark

-1.9% to +1.3% -0.5% to +0.6%

-1.4% to +0.8% -2.4% to +0.4%

-7.0% to -2.3% -2.1% to -0.7%

+3.9% to +7.2% +4.3% to +4.8%

-3.9% to +0.7% -4.1% to -1.8%

-0.8% to +4.6% +0.0% to +3.7%

-2.3% to +2.0% -0.8% to +0.9%

+1.2% to +4.3% +2.1% to +4.9%





while ADRs are projected to mostly decrease in Germany in 2012, this is

due to the significant reduction of value added taxes (VAT) that took effect

in early 2010 to sustain tourism and enable hoteliers to reinvest in theirproperties. This has caused the overall cost of stay to go down, even as

hoteliers have been increasing rates.

Both car rental and rail are viable ground transportation options for corporate

travelers in EMEA, depending on the country. For point-to-point service

between key business hubs like London and Paris or Madrid and Barcelona,

today high-speed rail often commands more market share than airlines.

However, despite rail deregulation in 2010, effi cient transborder train travel

across much of Europe remains a challenge, given inconsistent tracks across

most countries. Corporate car rental use in the region is most often with on-

airport providers, many of which are large, North America-based suppliers,

or European-based organizations that have alliance agreements with those

North American providers. Given this, there is a high level of competition

for corporate business, which creates downward pressure on pricing that will

ultimately result in 2012 rates that will slightly decline for some and slightly

increase for others.

Suppliers throughout the EMEA region will focus on meetings and events

(M&E) in 2012, as many global hotels are increasingly interested in

group business and are investing in their offerings accordingly, including

becoming more flexible on offering regional contracts rather than requiringseparate agreements per property or city. Even so, the cost per attendee per day for EMEA meetings in 2012 is expected to

decrease by 5-6%, as it is expected that more meetings will be held domestically rather than in other countries, reducing overall

travel costs for many attendees. Additionally, average group sizes are expected to be flat to down as much as 3% for the region.

RAIL

H1 2012 H2 2012

Finland

Belgium

France

Germany

UK

Spain

Sweden

Norway

+4.5% to +4.7% +4.6% to +4.7%

+3.4% to +3.7% +2.2% to +2.5%

+4.0% to +6.0% +4.2% to +4.5%

-1.8% to -0.7% -1.7% to -1.5%

-0.7% to -0.6% -0.5% to -0.4%

+7.9% to +9.0% +8.8% to +8.9%

+1.0% to +2.5% +2.2% to +2.4%

+2.5% to +2.6% +3.0% to +3.3%

Read the recently released

Q3 issue of CWT Vision for

additional perspective and

advice on the upcoming

2012 Summer Olympic

Games in London

Additional country-level projections across travelsegments for Europe, the Middle East, and Africa.

Hotel ADR projections by crown category for

Europe, the Middle East, and Africa.Car rental rate projections by car type forEurope, the Middle East, and Africa.

London

Rennes

NantesStrasbourg

Grenoble

Top 10 European rail routes for CWT clients in 2010

Source: CWT client data

All projections reflect anticipated price changes measured against

prices for the same time period in the previous year.

http://www.cwtvision.com/en/global/tmi/cwt_vision/issue11/insights/insight5.html






http://www.carlsonwagonlit.com/en/countries/us/Pdfs/EMEA_additional_projections.pdf




http://www.carlsonwagonlit.com/en/countries/us/Pdfs/EMEA_hotel_crown_category.pdf



http://www.carlsonwagonlit.com/en/countries/us/Pdfs/EMEA_carrental_car_type.pdf










10

Based on the economic growth it is currently experiencing, Latin America

(LATAM) is projected to experience some of the most substantial price

increases of any region across the main areas of travel spend. However,even as the region overall is expected to perform strongly as a result of

strong demand and export activity along with stronger relationships with Asia,

a closer look reveals disparate conditions by country. Some local economies

are experiencing solid prosperity, as others seriously suffer in the face of

political uncertainty, economic instability, and even governmental corruption.

The unemployment rates of Brazil, Chile, Mexico, Argentina, and Colombia

are all back to pre-recession levels. Colombia is expected to continue to

grow consistently, with quarter-over-quarter GDP growth of 4.4% expected

throughout 2012. Steady and successful moves to eliminate government

corruption and domestic subversive organizations have resulted in a return

of foreign investment and low unemployment rates.

Another success story is Brazil, which benefits from the presence of strong

local industries such as oil, forestry, mining, and overall manufacturing, and

continues to be an engine of regional growth. The country’s strong domestic

demand creates conditions that boost export growth from neighboring

countries; in fact, the country’s export volume is back to pre-recession levels,

and it and Colombia have increased oil production throughout 2011. Given

this, the strong demand for many travel services often outpaces supply in

Brazil, which will produce significant 2012 rate increases next year. Conversely,countries like Argentina are struggling despite its low unemployment rates,

challenged by high inflation rates of 10% or more, amidst declining GDP.

LATAM-based airlines will enjoy fare increases of nearly 6% overall in 2012,

with Colombia leading the way at increases ranging from nearly 8% to 11.4%.

Fare pricing in the region is partially a factor of increasing demand as the region

captures the attention of local and foreign investment, and the oligopolistic

nature of the competitive landscape at the domestic and intra-regional levels.

These markets are controlled by a few carriers that have expanded rapidly over the last few years to dominate multiple countries within

the region, consolidating assets and operations in the process to do so, such as partners LAN Airlines and TAM Airlines.

Hotel ADRs will also increase in LATAM for 2012, led by Brazil, where increases will range from more than 20% at the beginning of the

year to potentially 35% in the second half. Brazil’s hotel landscape will remain in the spotlight over the next several years, as it works

to add capacity in preparation to host the 2014 World Cup and the 2016 Summer Olympic Games. New construction focused on

these special events may help ease overall prices in the market after crowds have subsided and hoteliers find themselves needing to

continue filling rooms, though it remains to be seen whether continued strong demand will hold room rates high.

Car rental in LATAM is most prominent in Brazil, where prices are expected to be slightly negative to increasing in the nearly

4% to 4.5% range throughout 2012.

Latin AmericaAIR

Argentina

Brazil

Colombia

Mexico

+3.4% to +7.8%

+3.8% to +6.9%

+7.9% to +11.4%

+2.8% to +6.2%

CAR RENTAL

H1 2012 H2 2012

Brazil

-1.3% to +3.9% -2.2% to +4.5%

HOTEL

H1 2012 H2 2012

Argentina

Brazil

Colombia

Mexico

+5.4% to +10.1% +8.0% to +9.1%

+21.0% to +24.3% +28.1% to +34.1%

+3.8% to +6.6% +2.0% to +3.5%

+1.8% to +9.9% -0.5% to +5.0%

Additional country-level projections across travel segments for Latin America.Hotel ADR projections by crown category for Latin America.

Car rental rate projections by car type for Latin America.


http://www.carlsonwagonlit.com/en/countries/us/Pdfs/LATAM_additional_projections.pdf



http://www.carlsonwagonlit.com/en/countries/us/Pdfs/LATAM_hotel_crown_category.pdf



http://www.carlsonwagonlit.com/en/countries/us/Pdfs/LATAM_carrental_car_type.pdf









North America

Not unlike Europe, economic uncertainty in North America (NORAM)

continues to weigh heavily on organizations in many sectors. For

example, U.S. unemployment is expected to remain relatively high, at8.5%, through 2012, with ongoing high rates potentially holding for

five more years, and limited U.S. GDP growth is also anticipated, with

about 0.5% improvements quarter-over-quarter throughout the year.

The U.S. housing crisis that originated during the economic downturn

lingers in many markets throughout the country, and ongoing concern

over the level of U.S. debt and the strength of the U.S. dollar remains

a challenge in America and abroad. Conversely, Canada’s economy,

although affected, has been more stable throughout the past several

years, thanks to tighter governmental fiscal policies and management. Its

unemployment rate is expected to be 7.5% through 2012.

In the face of continued tenuous circumstances in NORAM, airlines based

in the region will remain extremely disciplined in their efforts to manage

capacity, with many responding to the latest round of uncertainty by

scaling back their capacity growth plans for the rest of 2011 and into

2012. The result is fuller planes and growing prices in most areas, as

carriers reduce supply even in the face of demand that remains intact in

both economy and premium class cabins, at least for now.

ADRs for hotels in NORAM are expected to increase modestly in the

United States, but be closer to flat in Canada when compared with theprevious four quarters. As always, specific ADRs vary widely across both

countries based on the specific geographic area and type of property;

for example, rates are expected to increase anywhere from 4-7% in the

northeastern United States throughout 2012, while most subregions

within Canada are expected to experience rate increases no greater

than 2% total. Importantly, hotels are nearly powerless to quickly scale

actual supply up and down in response to demand fluctuations, as the

construction of new properties takes years. Further, new construction will

not be creating substantial additional supply anytime soon; according to

PhoCusWright, the number of rooms in the U.S. hotel pipeline decreased

by 12.4% in August 2011 vs. the prior year, as global hotel brands focus

their development efforts in emerging markets.

The North American car rental market is highly consolidated, with just a few major suppliers. The intense competition for corporate

business has forced suppliers to reduce or keep prices flat to retain customers for the past several years, and that will remain the

case for 2012 in the United States. Similarly, rates should be mostly flat in Canada’s key corporate travel markets, such as Toronto

and Vancouver, though overall projections for car rental in the country indicate higher price increases based on activity outside of

those business hubs.

M&E spend is expected to continue making a steady recovery throughout NORAM in 2012, including for internal meetings,

incentive trips, and international meetings, with average group sizes expected to grow 1-4% for all meeting types vs. 2011 levels.The cost per attendee per day will also increase by 5.5-6.5% as a result of strong demand and limited supply in related travel

Displays percentage inflation forecast against 4 quarters prior

CAR RENTAL

H1 2012 H2 2012

Canada

USA

+6.7% to +9.9% +5.4% to +8.1%

-3.2% to -0.6% -3.0% to -0.7%

HOTEL

H1 2012 H2 2012

Canada

USA

+0.2% to +2.5% +0.8% to +1.8%

+3.5% to +4.4% +3.5% to +4.6%

AIR

Canada

USA

+7.5% to +7.8% -2.5% to +0.6%

-5.0% to -0.1% +3.6% to +5.2%

Domestic

Business/First Economy

Canada

USA

+

2.2% to+

3.5%+

4.2% to+

4.8%

+3.6% to +4.8% +6.1% to +7.3%

International

Business/First Economy




12

Recommendations

Given the expectations outlined here for 2012 travel prices, following are CWT’s recommendations for the most impactful ways

travel buyers can navigate next year’s supplier’s market and mitigate the effects of cost increases to their organizations:

Air

Understand contractual savings. CWT’s forecast shows airfares will increase worldwide in 2012, making it a challenge for

travel buyers to demonstrate the value of their negotiating efforts, particularly to procurement-minded leadership. One way

to still quantify the value of a preferred airline program is via a net effective savings rate (NESR), which highlights the total

fare savings percentage generated by a corporate airline contract. It calculates the savings resulting from the contract, divided

by what the organization would have spent with the airline using published, non-discounted fares. Even in the face of rising

fares the NESR will show cost avoidance results.

Segment the spend. As part of overall efforts to continually monitor market conditions, a “de-linked market strategy” can

drive incremental airline savings despite overall price increases. With this approach, buyers isolate their most frequently

traveled city pairs from the rest of their air volume, and negotiate it separately. The top markets are each “reverse auctioned”

with the promise that the most competitive airline will become the only preferred carrier on that route, and the rest of the

volume is handled with a traditional RFP. This enables clients to receive the best possible pricing on routes where they

already spend the most money. More broadly, buyers must continually monitor prices throughout the life of the contract toensure their preferred carriers are being competitive with the rest of the marketplace.

Stay focused on ancillaries. Ancillary fees continue to drive billions of dollars of revenue to the world’s airlines, though

buyers continue to receive little information from their carriers on how much is spent and what is purchased. Clients should

continue to advocate for visibility into their ancillary fee spend, and should push for the opportunity to negotiate discounts

on the ancillary fees that are most important to them.

Reduce prices yourself. While rising prices may seem out of a buyer ’s control, there are many internal measures available

to reduce the organization’s overall average ticket prices, including: increasing the length of advance purchase required prior

to departure; requiring the purchase of nonrefundable fares vs. more expensive flexible tickets; restricting premium class

to use; increasing online booking tool adoption; reducing the total number of flights by consolidating trips or using travel

alternatives where possible.

categories like air and hotel, though market-specific increases will range as broadly as 2-9% given varying demand and pricing in

local geographies. As corporate travelers and meetings and events return to hotels, property availability will become an increasing

concern for meeting buyers and planners in 2012, and hotels will be less willing to provide flexibility on contractual termslike attrition and cancellation clauses. Organizations are expected to maintain their increased focus on enterprise-wide meetings

management in 2012 as well, in the face of continued pressure on cost and interest in safety and security for M&E as well as

transient travel programs.

North America continued

Hotel ADR projections by crown category for North America (also includes sub-region breakdowns).

Car rental rate projections by car type for North America.

http://www.carlsonwagonlit.com/en/countries/us/Pdfs/NORAM_hotel_crown_category.pdf



http://www.carlsonwagonlit.com/en/countries/us/Pdfs/NORAM_carrental_car_type.pdf








Hotel

Emphasize LRA. Last room availability (LRA), whereby hotels agree to honor the corporation’s negotiated rate for a particulartype of room even if only one more room is available for the night, is more important than ever in the world’s many high

occupancy cities where hotels are at full capacity on many weeknights. Hotels will be more selective about granting LRA in

2012 given they could get much higher premiums selling their last available rooms to any traveler willing to pay. However,

buyers should insist on LRA in their top travel markets, though they will need to be willing to pay a higher overall rate to get

it included in their contract.

Focus on total cost of stay. In addition to the higher ADRs CWT is projecting buyers will face next year, hotels continue

to drive incremental revenue through the implementation of more ancillary fees, and are currently less willing to grant

traditionally complimentary amenities with the contracted rate. All of these elements contribute to the total cost of stay, so

buyers must focus on all charges, not just ADR, during negotiations.

More vs. fewer properties. While on opposite sides of the spectrum, each of these approaches can yield positive benefits,

depending on the situation. Consolidating to fewer preferred hotels in a market can effectively make a company a largerclient to their preferred hotel, resulting in better pricing and contract terms. Conversely, in high occupancy markets buyers

may need to add several additional properties to their program in a market for additional coverage, particularly in the

absence of an LRA agreement.

Ground Transportation

Expect flat rates. Given the high level of competition among few suppliers, car rental is one of the few areas where buyers will

enjoy lower or flat rates in 2012 compared to 2011. In this environment, any supplier bids that start by proposing an increase

should be strongly questioned. In addition to this forecast data, buyers can use industry benchmarking provided by their travel

management company and other suppliers to help make the case for flat or lower rates.

Consolidate suppliers. Given most regions are serviced by only a few car rental suppliers, buyers have significant opportunityto consolidate their volume with one or two providers to drive deeper discounts and better products and services for travelers.

Beyond rental rate alone, buyers may be able to negotiate more premium car types for their travelers, or the inclusion of

amenities like a GPS device.

Check the market regularly. To ensure they are receiving the best possible pricing and service, CWT recommends travel

buyers conduct a full Request for Proposals (RFP) process every two years.

Demand full data. Buyers should require their preferred car rental suppliers to provide them all data from their travelers’

bookings, so they can gain visibility into not just the actual rates being assessed, but how much the organization is paying in

ancillary fees. This enables the buyer to conduct more informed negotiations on the items that represent the greatest expense.

Meetings & Events

Book early. The fact that hotels in many top business markets will be nearly sold out on peak nights in 2012 has direct

implications for meetings and events. The challenges will only increase as group business continues to grow and group sizes

expand moderately in North America. Corporate meeting planners will need to extend their booking windows to secure

available space and to have better negotiating power with suppliers.

Align contracting. Driving a group of meetings to one property, or to a group of properties within a hotel chain, throughout the

year should result in better pricing and service than contracting each meeting separately across multiple suppliers. The same

hotel chain may also offer consistency across locations, though meeting planners should be careful not to assume a brand’s

offering in one region is identical in another without visiting firsthand or seeking other feedback from planners or attendees.

Maintain SMM momentum. Many organizations have at least begun to explore a Strategic Meetings Management (SMM)

program, and some are well underway in the process. Regardless of progress to date, the level of management an SMM

provides for an organization’s meetings and events can only benefit the company in terms of savings, service, safety andsecurity, and more. As supplier pricing drives the cost of meetings and events up in 2012, SMM results can help mitigate some

of the increases while delivering other benefits to the organization.









CWT Solutions Group

CWT Travel Management Institute

The CWT Solutions Group is the global consulting arm of Carlson Wagonlit Travel, with practice areas dedicated to helping

clients with their managed airline, hotel, and ground transportation programs, and to help clients drive travel policy and

compliance improvements, with a wide variety of specific offerings in each practice area. CWT Solutions Group consultants

combine their corporate travel expertise with local knowledge in all regions to drive substantial savings and other program

improvements for their clients.

The CWT Travel Management Institute conducts in-depth research into effective travel management practices to help clientsworldwide derive the greatest value from their travel program. Drawing on the global resources of Carlson Wagonlit Travel, the

institute aims to provide a regular flow of business intelligence and best practices, offering actionable insights into what CWT has

identified as the eight key levers to effective travel management. To this end, the CWT Travel Management Institute publishes

original research, white papers and case studies, and co-produces the global periodical CWT Vision. The institute’s most recent

research is Business Travel Services: Finding the Right Fit , released in June 2011.

Documents

Cwt 2012 Travel Price Forecast