Embed Size (px)
Citation preview
Click here or press enter for the accessibility optimised version
Welcome message
Click here or press enter for the accessibility optimised version
2020 - a yearof potentialAs we look ahead to a new decade,there are many economic, politicaland technological influences drivingchanges in the world of corporatetravel.
Our Global Travel Forecast aims tohelp businesses and travelers aroundthe world to identify and navigatethese shifts. It highlights new and
developing trends across the air,ground and accommodation sectors –all with a view to making thecorporate travel experience asseamless as possible.
This report is made possible thanks toa collaboration between CWT and theGlobal Business Travel Association(GBTA), based on data and expertise ofRockport Analytics, with additionalanalysis from CWT Solutions Group.
Macroeconomic overview
Global travel outlook
Asia Pacific
Europe, Middle East, and Africa
Latin America
North America
2020 vision
Appendix 1 - Methodology
Appendix 2 - Foreign exchangeforecast
Appendix 3 - Additional travel pricedata and footnotes
Macroeconomicoverview
Click here or press enter for the accessibility optimised version
The BigPictureOil prices, trade wars andinflation – we look at thefactors set to impact theglobal economy
Losingits lusterThe global economy grew by 3.6% in2018, which helped to spur demandfor travel goods and services andgenerally support travel priceincreases by global suppliers. Through2017 and early 2018 the worldbenefited from a brief return tosynchronous global growth –
emerging markets performedsignificantly better than in precedingyears with both Brazil and Russiarecovering from recession; India andIndonesia’s economies continued togrow at near double-digit rates andChina’s economy has continued tomoderate without any significantdownside surprises to growth.Advanced economies also performedmuch better through the middle of2018 as both fiscal and monetarystimulus fueled economic growth,
healthier labor markets, risingbusiness and consumer confidenceand growing corporate profits.
As we moved into late 2018 the globaleconomy began to show some cracks,however. The US Federal Reservebegan tightening which put pressurenot only on US GDP growth but alsoon emerging markets, as the dollar-denominated debt held by much ofthe developing world took a hit andthe rising dollar put pressure oncommodity prices. At the same time,we saw economic risks on the fiscalside begin to rise as the Trumpadministration started the ignition onglobal trade wars which haveescalated with tit-for-tat actions withChina. The European economy alsofaced economic challenges, mostnotably a slowdown driven bysignificant challenges in Germany, ashallow recession in Italy andprolonged uncertainty in the UKaround Brexit. In APAC, the Australianeconomy faced significant challengesin the back half of the year driven byvolatility in real estate prices inMelbourne and Sydney and while
economic growth in Japan improved,inflation has remained stubbornly low.Most of these economic challengeshave crept into 2019 and we areeyeing a number of key risks to ourtravel price forecast for 2020. Many ofthese risks have tilted towards thedownside in recent months:
1. Trade war escalation:Far and away the biggestdownside risk to our global travelprice forecast is the furtherescalation of trade wars. Globalbusiness travel is tightly tied to
the health of global trade and anybarriers to trade create animmediate headwind to globalbusiness travel demand.Moreover, the spillover effect onconsumer and businessconfidence could further erodeeconomic and corporateperformance in key globalbusiness travel markets, leadingto additional downward pressureon business travel demand andmore benign travel priceincreases in 2020. US-China tradediscussions are set to resume atthe beginning of August inShanghai. While this is a step inthe right direction most expertsare expecting prolongednegotiation, perhaps extendingout to the 2020 US presidentialelection.
2. Recession looming in majoreconomies?The risk of a recession in the U.S.
has increased significantly inrecent months, fueled by theaforementioned risk of tradewars, along with volatile equitymarkets and slowing impact from2017 tax legislation. Likewise,Western Europe is facingsignificant challenges includingeconomic headwinds andtumbling business confidence inits largest economy, Germany,and remaining uncertaintyaround Brexit and trade dealsbetween the UK and EU membercountries.
3. Oil prices and Middle Eastdisturbances:Oil prices are always key to theoutlook for both the globaleconomy and global travelprices. The price of crude has animpact on global production andchanges in oil prices find theirway into the prices of virtuallyevery good and service
consumed globally. This isparticularly true for airfares forwhich the price of oil is a directinput. As oil prices spike, we tendto see an almost immediate risein the cost of airfare. The supply-demand dynamics moving into2020 portend relatively flat pricegrowth in oil next year, however,oil prices are notoriouslysensitive to supply shocks. Weare watching rising tensionbetween the US and Iran veryclosely as a possible catalyst todrive oil prices, and airfares,higher.
4. Inflation:Global inflation continues to runbelow trend although we haveseen spikes in specific markets.Prolonged expansionarymonetary policy in major globaleconomies has yet to spurinflation globally. In fact, we haveseen a breakdown in the so-
called Phillips curve in many ofthese markets. This curve is usedby economists to illustrate theinverse relationship exists (inmore typical times) betweenlevels of unemployment andrates of inflation. Despiteunemployment levels dipping inmost major economies, inflationhas not kicked into a higher gearand thus far shows no signs ofdoing so. Nevertheless, it is a riskto watch as pent-up inflationfueled by easy monetary policycould lead to unexpected andsudden increases in prices ifeconomies heat up quicker thananticipated.
5. Volatility in the dollar:We expect the recent US dollarstrength to begin to weaken inlate 2019 and into 2020 as theFederal Reserve is expected toreverse course on monetarytightening and again begin to cut
rates which should putdownward pressure on thegreenback. Central bankers inother major economies are alsoexpected to remain mostlyaccommodative into theforeseeable future which should
lead to relatively stable exchangerates in 2020. This is somethingwe will continue to monitorthroughout the year since anyfluctuation has a significantimpact on global travelmanagers.
We will continue to see growth in theglobal economy with the IMFexpecting global GDP to advance 3.6%next year. The heightened levels ofuncertainty, however, are likely to actas a governor on corporate spendingand the demand for business travel inmany major markets. We expectglobal airfares to rise by 1.5% as loadfactors are likely to retreat somewhatfrom current levels and competitionamong low cost carriers will continueto put downward pressure on fares.Global hotel prices will also be muchmore modest than what we havewitnessed over the last five years assupply growth is likely to continue tooutpace demand growth in 2020. Thiswill lead to an increase of only 1.3% inhotel rates, globally. Groundtransportation will continue to see themost modest price growth of the threesegments with prices picking up only1% over 2019 levels.
Global travel outlook
Click here or press enter for the accessibility optimised version
The Future ofCorporateTravelThe business of businesstravel is the first to feel thehit from changes to nationaland global economies.Global uncertainty and theresulting decline inconsumer confidence areslowing the pace of global
consumer confidence areslowing the pace of globalgrowth and bringing with it,price increases in air, hoteland ground travel.
2020 Vision?As far as forecasts go, this calendaryear lends itself to a phrase that willlikely be over-used: “2020 vision.”That’s not, however, how most global
companies would describe theiroutlook.
Political, economic and environmentaluncertainty is leading to a slowinggrowth trajectory. The GlobalUncertainty Index, a barometer ofunpredictability in 20 countries,reached a record level in 2019, basedon the frequency that news outletscite "uncertain" or "uncertainty" inrelation to economic policy.
US–China trade tensions,macroeconomic stress in Argentinaand Turkey, and financial tighteninghave all contributed to a weakenedglobal expansion.A broader trade war could reduceworldwide passenger movements byan estimated 68 million, according toIATA.
Brexit remains a key issue and withthat the potential for companies and
executives to move location, causing aknock-on effect on the traffic mix andtraffic pattern in and out of the UK.
As global climate change worsens,hurricanes, earthquakes, floods andtyphoons can cause disruption andhealth and safety concerns fortravelers. According to a report by theU.N Office for Disaster Risk Reduction,since 1998 direct losses from naturaldisasters have totaled over $2.9trillion, and 77% of these disasters area result of extreme weather thatcontinues to intensify as the worldwarms.
On the plus side, advances intechnology and data science meanthat businesses can take tangibleaction to mitigate the potential impactof environmental, political andeconomic uncertainty, and keep theirtravelers satisfied, safe andproductive.
Circling theGlobe
Russia, Indonesia, India andChina are projected to have thegreatest gains in GDP per capita,among major countries.
The US Dollar is projected toweaken against the currencies ofmost developed economies.
An intensification of the currenttrend towards tradeprotectionism, as exemplified bythe actions of US PresidentDonald Trump, could haverepercussions on passengertransport. Demand for premiumtickets would bedisproportionately affected by atrade war.
People FirstSaving money is usually a top priorityamidst economic and politicaluncertainty. For some businesses thatmeans, “compliance,” a term asmotivating to an employee as“commute.”
But while some travel policiesprioritize cost-cutting over employeechoice and convenience, moderntravel buying is undergoing a seismicshift. Some countries have obtainedan almost zero unemployment ratealongside an expected increase inhiring executives. The combinationcreates tension in the market andmakes attracting and retaining talentcritical.
Travel policies that focus on upfrontsavings could affect staffing andfinancial performance. Delayed flights,unhealthy food, and grueling
schedules cost companies inabsenteeism, medical costs anddecreased productivity.
There’s a growing trend towardsputting traveler experience and theemployee at the core of the travelprogram and away from outdatedpolicies and tools that focus oncompliance.
Research shows that travelers aregenerally happy to share their travelpreferences with both apps and travelindustry staff – globally nine out of ten(89%) of travelers are “extremely or“somewhat” willing to do so. Buildinga picture based on that data can helpbusinesses navigate potentiallychoppy waters in the year ahead.
Fair Trade?
Given the solid link between businesstravel and trade, any negative impacton trade flows would bear uponbusiness travel. It is expected thatdemand for premium tickets (businessand first class) will be most effected.Premium capacity makes up a smallproportion of total seats flown in theindustry (around 5% of the total,according to IATA) but it generates
25% of total airline industry revenues.Thus, the impact of increasedprotectionism on business travelers is
likely to be more immediately visiblein airline financial results than in thepassenger totals.
Blurred Lines
Traditional demarcations ofaccommodation will continue to blur.Midscale hotels are looking to hostels,luxury hotels to boutiqueaccommodation. AirBnB for Workannounced plans to expand in Asiawhile traditional chain MarriottInternational launched a home rentaloffering in 2019 serving over 100markets.
New features, guest reservationsystems and technology will alsochange the face of hospitality. Offeringchoice is therefore critical to embracethe changing face of business travel.
An abundance of choice compelstravelers to book within corporatechannels.
Wheels on fire
Rental car rates are set to rise by 1%globally, due primarily to a boom ininternational tourism which supportsdemand for car rental services. Risingdisposable income in emergingeconomies coupled with healthyeconomic growth in developingcountries is expected to have apositive impact on the car rentalmarket.
Equally, there’s a growing sentimenttowards environmentally-consciousdecision making. More consumersprefer ride-sharing and car rental toowning a vehicle.
There are significant changesunderfoot in ground transportation.Technological progress in areas like
electric and autonomous vehicles anddisruptive business models such asDrivy – a European car rental servicethat offers car owners the opportunityto rent cars out when not in use –
make it an area of business travel tokeep a keen eye on.
Asia PacificGlobal uncertainty has slowed oncestratospheric growth, but Asia Pacific willremain the fastest growing region.
Click here or press enter for the accessibility optimised version
GrowingPains?Asia Pacific is the fastestgrowing region but keep aneye on potential dampenerslike rising oil prices and U.S-China trade relations.
Still in the leadThe roar of Asia’s expansion hasquietened slightly due to factors likeU.S - China trade relations, tighterglobal financial conditions, andnatural disasters. But the regionremains the most dynamic with steadyGDP growth of 4.5% in 2018 and
benign inflation. Asia still accounts fornearly two-thirds of global growth.
Since China holds disproportionateinfluence, it will be integral to keep aneye on trade relations with the U.S.Though the impact has been minimal,companies are preparing forpotentially rocky times ahead. Somecompanies - particularly in the
banking sector - are putting measuresin place to drive down costs.Asia’s second largest economy, India,will see a spike in investment anddemand for business travel. The 2019election gave the current governmenta boost. Rapid progress will continuethroughout 2020 and beyond.
Looking downthe barrel
With China buying Iranian oil indefiance of U.S sanctions, we couldface a crude dispute that requirestravel buyers to keep a keen eye ondevelopments. The relationshipbetween Iran and the U.S may disruptthe flow of oil. Over the last two yearsthe price of oil has fluctuated,
however it has increased byapproximately 26% since June 2017.
Strong connections and dynamiccompetition in Asia helps airlinesmaintain reasonable pricing despiteincreases in oil prices.
Can ‘no frills’pay the bills?If there’s a change in the cost of fuel,low-margin airlines will be the first tobe impacted, first and foremost thosewith ground to make in terms of howthey operate.
The shutdown of Jet Airwaysoperations in April created asignificant vacuum in the market andhas impacted key routes. While thevacated slots have been taken up byvarious airlines, the reducedcompetition has caused airfares to
increase. The market was alreadyfacing a reduction in available seatsfollowing the grounding of the Boeing737 Max and several Airbus 320 Neoaircraft in March. We may see otherairlines undergo restructuring or berepurchased.
On the plus side, airlines areconstantly monitoring the market,adjusting their contracting discountsand looking for hedging opportunitieson a more regular basis. They’reincreasingly able to anticipatechanges that might impact the cost oftravel.
EasternPromiseA wave of activity and investment isunderway to boost connectionsbetween Asia and global hubs, withregional hubs competing for the sameconnections.
Following the recent inauguration ofChangi Airport Singapore’s terminalfour, the Airport Authority of HongKong is implementing a bold plan toenhance their 20-year-old facilitythat's expected to cost more thanHK$140 billion (US$18 billion).
According to the Vision 2040 reportreleased by India’s Ministry of Civil
Aviation, the country will aim to opennearly 100 more airports over the nexttwo decades, and have 190-200operational airports by 2040. India’scommercial airline fleet is also likelyto grow from 622 in March 2018 toaround 2359 in March 2040.
Beijing’s new Daxing InternationalAirport is scheduled to open in
September. Beijing CapitalInternational Airport has beenoperating at full capacity for severalyears with flight delays being a regularoccurrence. The new airport will helprelieve some of this pressure. Theairport’s four runways, and its locationaway from the main city area, shouldalso help reduce delays andcancellations.
Rooms witha View
Asia’s hospitality industry is boomingwith hotel investment volumespredicted to grow by 15% year-on-year. China and India will seesignificant expansion, along withsmaller hubs such as Malaysia, whichwill see 13 new hotels scheduled toopen in 2020.
Japan is hosting several upcominghigh-profile events, including theRugby World Cup, Olympic Games andParalympic Games. Commercial realestate firm CBRE projects that around80,000 new hotel rooms will open innine major cities between 2019 and2021, a 24% increase over the roomsavailable at the end of 2018. Still,there’s a minimal risk of oversupply asthe country experiences high demandand inbound tourists could reach 40
million in the coming years.
Meanwhile, Japan is alsoimplementing emergency serviceprocedures in the event of a majorearthquake occurring during theseperiods of high visitor arrivals.According to the government’searthquake forecast, there’s a 48%chance that a magnitude 6earthquake, or above, occurs in Tokyoin the next 30 years.
Clause forconcern
Corporate travel buyers are reducingthe number of contracts they havewith hotels in cities like Singapore,Sydney and Melbourne. A similartrend has been observed in high-
occupancy cities in Europe and NorthAmerica. Less contracted hotelsequates to creative sourcing andworking with suppliers on a scalelarger than previously possible.
An appetite for chainwide discountsand dynamic pricing - or the ability toadjust prices based on current marketdemands - will continue. Corporatetravel buyers see less benefit fromtraditional advance purchasing andlast room availability (LRA).
Sticking PointWhen your travelers get the rightcontent and competitive pricepoints through your corporatechannels, you can createadditional savings, improve yourreporting and locate travelersmore easily in an emergency. Thekey is to offer your travelers morechoice.
Drivingcompetitionin China
Declining revenue for car suppliers isattributed to steady demand andincreased competition.
State-owned automaker SAIC Motorannounced in 2019 that its car rentalbrand Xiang Dao will provide a
business car rental service tocompanies replacing the existingventure it currently has operatingunder the AVIS Budget Groupbranding. Major players in the carrental service in China include Car Inc,eHai, Shouqi car rental and Yongda.We expect SAIC Motor to be acompetitive service provider becauseit has car capacity and business carrental operation experience from AVIS.SAIC Motor’s entry will furtherintensify competition in the businesscar rental market.
Shareof the rideChina’s largest ride-hailing company,Didi Chuxing, has been growing itsfootprint across the globe. Outside ofChina, Didi already has operations inJapan, Australia, Brazil and Mexico,and it has now set its sights on other
Latin American countries includingChile, Peru and Colombia. Otherplayers from the region such asSingapore’s Grab, Indonesia’s Go-Jekand India-based Ola have also beenpursuing aggressive expansion plansinto overseas markets.
While a recent CWT survey of travelmanagers found that theoverwhelming majority of travelprograms in Asia Pacific permit theuse of ride-sharing services, travelersafety still remains a key concern. But
the widespread publicity surroundingvarious accidents and attacksinvolving ride-sharing providers haveprompted these companies to putmore stringent safety measures inplace. Uber, Grab, Ola and Didi haveall added emergency buttons in theirapps, as well as ride-tracking whichallows passengers to share their tripand location in real-time. InSeptember last year, Didi introducedin-trip audio recording. A month laterGrab announced it would double itsinvestment in safety by the end of2019, introducing new initiatives andfeatures such as using data from theapp to measure driver fatigue.
Europe, Middle East &AfricaA look at key developments in air, hotels andground transport across Europe, the MiddleEast and Africa.
Click here or press enter for the accessibility optimised version
Clouds on thehorizon?Despite politicaluncertainty, the economy inEurope, Middle East andAfrica (EMEA) has beenrelatively constant.
SteadygrowthAccording to the IMF, the region willsee steady GDP growth, ranging from0.3% in the Middle East to 1.6% inEurope (2.4% in Eastern Europe) andup to 3.6% in Africa.
A stable price progression year over
year across Europe, Middle East andAfrica aligned with this GDP growth,inflation and a steady increase indemand look to continue into 2020.With political changes on the horizon,however, we may see this slow in thecoming years.
To some degree, we need to take await and see approach before we canunderstand the supply and demandimplications of Brexit as well as issues
in the wider EMEA region, includinglabor strikes, climate change protests,global trade wars, rising oil prices andregional terrorism. All of these factorshave the potential to cause aslowdown and slow demand recovery.However, much like in North America,the consolidation of travel data canhelp travel managers to keep tabs ontheir travel programs and costs,preparing them to weather upcomingpolitical storms.
The UK is still facing the uncertainty ofwhat will happen with Brexit. Set toleave on October 31, 2019, it remainsto be seen if Parliament will finallyagree to exit terms in line with theEuropean Union’s proposed deal, orleave on World Trade Organizationterms without one. Operating costs forconsumer outbound UK holiday travelcompanies are projected to rise up to
58% after Brexit and if ‘no deal’triumphs, it is likely to causedisruption to business and impactcorporate travel - at least in the nearfuture. Companies are likely to canceltrips to the UK due to uncertaintyregarding immigration forinternational travelers, which willhave a knock-on effect for travel to/from the UK and Western Europe.
Deal or no deal?
Flying steady
We do not expect to see any surprisesin prices across EMEA in the comingyear. The projected price changesaverage 2.2% for the Middle East andAfrica, -0.2% for Eastern Europe and0.5% for Western Europe, which is inline with last year’s predictions.
Any larger increases are linked tospecific destinations, for example, the
Middle East and emerging economiesin Africa will see the largest changes.
Opening upthe MiddleEast & AfricaOil and gas-related business travelbetween Western Europe and theMiddle East continues to be one ofhigh traffic, and Turkish Airlines haseven added a new player to the mix to
compete with the more established,financially struggling UAE-basedairlines. The increased competition isdue to Turkish Airlines creating newroutes and increasing the frequency oftraffic between Eastern Europe andthe Middle East as the grow their newIstanbul hub operation. Its newIstanbul airport – one of the largest inthe region – will also change thedynamic and flow between Europeand Asia, providing an alternativestopover point for flights to China andEastern Asia.
New Istanbul airport
Similarly, Kenya Airways is helping toincrease business traffic betweenEurope and Africa. With a highfrequency and range of flightsbetween the two continents and itsmembership in the Sky Team alliance,they are set to compete with SouthAfrican Airways, driving cost effectivetravel to the region.
Legacy vs. low-cost:a business propositionWhile businesses tend to favor larger legacy airlines for their travel programs, new and low-cost carriers are stillaffecting the corporate travel market. We anticipate that ongoing competition between legacy and low-cost carriers inWestern Europe will influence the fare and pricing structure as legacy carriers battle to regain market share. These riseswill have the most impact on intercontinental flights where there is less competition.
With these price wars raging, NDC is also affecting how businesses purchase air travel. Airlines are using both factors torevamp the way they distribute fares and travelers are gaining greater transparency so they can select the right fare forthe right trip, avoiding extras they do not need, like baggage for a one day trip. Once NDC’s transparency can be linkedwith personalization technology, it will allow travel managers and travelers to compare booking fares, providing a moreaccurate picture of the cost and benefits of each.
Dynamic shifts
Even with the cloud of politicaluncertainty across Europe, we expectregional price fluctuations betweenbetween -3.4% to 5% for 2020, withthe larger increases in Eastern Europeand the Middle East, echoing theprojections for air.
Denmark and Egypt are both countriesto watch, with hotel prices in Denmarkexpected to dip next year (-3.4%
growth). With a projected GDP growthof 1.6% in Denmark and a growingdemand for accommodation, theexpansion of suppliers and anincrease in hotel capacity should driverates down.
On the other hand, Egypt’s rates areon the up - projected to rise by 4.7% -as its economy and inflation aresettling down after a period of unrest.Cairo is already investing insustainable growth plans for travelers,expanding its airport to welcome 8million visitors. All this will helpincrease tourism in 2020 and beyond -and with it, business travel.
Hotel chains have started to shifttoward dynamic rather than fixed ratemodels. This means the focus willneed to change to off-peak times inlow availability areas to have access tothe best discounts and lowest prices,as volume discounts will be fewer andfarther between. Advanced booking
should also be encouraged – as priceswill go up closer to the travel dates.We are also seeing more companiesintroduce rate caps for bookings,especially in more expensive cities likeLondon, putting pressure on hotels tohonor group bookings and discounts.
While sharing economyaccommodation is much morepopular for longer business trips inEurope than in North America, it stilldoes not dominate the business travellandscape, due in part to unregulatedlevels of security and inconsistentcheck-in and out procedures.
With some sharing economy playersand independent boutique hotelsoffering corporate packages, however,larger hotel chains are upping theirgame to compete – providing moreexperience-enhancing options fortravelers, including collaborative co-working spaces and on-premise cafes.
Chains like Marriott are also starting toenter this market with their Homes &Villas pilot of home share rentals, so itwill be an area for corporate travelersto watch.
Do you favor hotels withcollaborative workingspaces for business trips?
See results
Yes
No
Sharing economy experiencesfrom traditional hotels
A smooth roadfor rental cargrowth
Without the knowledge of fleet costsfor 2020 and beyond, predicting theprices for car hire for the coming yearcan be challenging, as 35% of the costis generally fleet related. We areexpecting growth to remain fairlystagnant for the coming year,however, with average prices
predicted to increase 0.5% in WesternEurope, the Middle East and Africaacross all car models. EasternEurope’s franchise model for rental carbusinesses will see slightly highergrowth of 1.5%, due to the supply anddemand trends in the countries in theregion.
Rail: asustainableinvestment?While rail prices vary greatly acrossEMEA, they are dependent largelyupon the networks and servicesthemselves – many of which are stillregulated by governments. Thanks tothe EU’s Fourth Railway Package,these networks are starting to open inEurope. Passed in 2016, the six pillarsof the Package are now being rolledout across Europe, with the goal to
revitalize the rail sector and boost itscompetitiveness. This means new low-cost players like German Flixbussubsidiary, Flixmobility arechallenging national leaders likeDeutsche Bahn and France’s SNCF,which should help to lower fares andbalance price increases.
In addition to changes in regulations,climate change is driving investmentin rail as a greener alternative to flyingor driving. In addition to itsnationwide railway network upgrade,the UK could be seeing hydrogen fuelcell-powered trains as early as 2021 ina drive to cut its carbon emissions.Between competitive pricing and acall for greener business, travelmanagers would do well to keep aneye on rail for business travel acrossEurope.
Does your business have aclimate change policy inplace to promote railtravel over flights or carjourneys?
See results
Yes
We are working on one
No
Advanced purchase for abetter class of travelGreen or not, a key obstacle for business train travel is value for money.Overcrowded commuter trains with fares that can far exceed flight prices area huge deterrent, especially for longer journeys. Booked far enough inadvance, however, first class train travel can not only offer the best valuetickets, but a guaranteed seat and a quieter, more productive environmentfor business travelers to work.
Recommendation
By capturing the total cost of eachtrip – including all transport, bed,board and any related expensesfrom leaving to returning home –travel managers can create aholistic picture of the travelprogram. Understanding thiscumulative value helps to:
Identify opportunities tomanage and offset any priceincreases.
Compare data with industrybenchmarks and use it as anegotiation tool for moreimpactful conversations withsuppliers.
Latin AmericaLack of clarity around major politicaloutcomes make the outcome for businesstravel difficult to distil.
Click here or press enter for the accessibility optimised version
SouthernDiscomfortA volatile political andeconomic situation remainsin some of the largesteconomies in Latin America.
PoliticalvolatilityEconomic activity in Latin Americacontinues to rise – but at a slower ratethan previously anticipated and, isexpected to advance by 2.5 % in 2020– below peer nations in other regions.
An unstable political and economicsituation remains in some of thelargest economies, contributing to aslowdown with Argentina, Mexico andBrazil expected to struggle most.Argentina – which will see presidentialelections in October 2019 – isundergoing difficult economicadjustment; fiscal and politicalchallenges weigh on Brazil; andtensions run high in Mexico.
President Trump’s announcement of a5% tariff on Mexican imports to theU.S could have dire consequences.Business travel will be the first to go.The crisis in Venezuela continues toworsen. Amidst a humanitarian crisisand shortages of power, food andmedicine, current rates of migrationcould see more than 1.5 million crossthe border into Brazil.
An even plane
Given the long distances, a growingmiddle class, and low marketpenetration of air travel, opportunityis ripe for the growth of commercialaviation, and airlines are takingadvantage of it.
Since 2017, several new carriersentered the market, met with soliddemand. Low-cost carriers have
gained significant share in Brazil,Mexico and Colombia, Latin America’sthree largest air travel markets.The most recent new entrants aredriving traffic through serving clientsegments, which otherwise wouldhave travelled by other means, suchas intercity buses. Cost is still mostlikely to be the key competitive factorwith new entrants focused ongenerating ancillary revenue.
Eyes on BrazilWe expect the recent grounding ofAvianca Brazil to increase pricing,
bringing the number of domesticairlines down from four to three.
Although capitalizing on Avianca’sbankruptcy, Air Europa’s applicationto operate domestic flights withinBrazil could stabilize pricing. Themove is a direct result of laws allowingforeign airlines 100% ownership ofBrazilian airlines.Pricing could go up as a result ofPresident Bolsonaro’s announcementto veto legislation allowing passengersto check in one piece of luggage of upto 23 kilograms (50 lb) free of chargeon domestic flights.
Soft opening
Following a steady decline in newhotels from a 2015-2016 peak –Lodging Econometrics (LE) reportedthe total construction pipeline down8% year-on-year (YOY) –things may bepicking up with Mexico leading theway.
After a slowdown in 2018, more than10 new corporate chain hotels openedin the region in the first quarter of
2019 with growth set to continuethroughout 2020. Properties in Mexicoand across Latin America are likely tocontinue to reduce their pricing.
A sportingchanceAfter the 2016 Summer Olympics inRio de Janeiro, several hotels closed
their doors, unable to fill their rooms.Reduced volume has impacted theaverage room rate in Rio, however, anew sporting event may change thatoutlook and warm the market.
President Bolsonaro aims to bringFormula One to Rio from São Paulo,after the contract ends in 2020.Bolsonaro plans to stage the grandprix at a new track that will hold130,000 fans.
Gainingground
A 1% rate increase in rental cars isdriven in part by a boost in demand inBrazil, the region’s biggest economy.Rental car companies report a culturalshift towards sharing cars rather thanowning them, and a growing tourismindustry is also boosting the industry.
North AmericaExploring changes in air, hotels and groundtransport in North America.
Click here or press enter for the accessibility optimised version
At the tippingpointWhile the health of the USeconomy thrives, there is alooming uncertainty, partlydue to tariffs and tradewars.
A gradualslowdownThe 2019 US GDP growth is set to slowto 2.1% (versus 3% in 2018) and therate is expected to decrease in 2020and 2021 down to 2% and 1.8%,respectively.
If this slowdown does come tofruition, it can affect businesses andultimately travel programs. Planningahead is essential to ride out anydownturns to do this, and travelmanagers need to monitor their traveldata regularly.
Diligence is the key to being prepared.By having an accurate view andunderstanding the full picture of travel
preferences within their organizations,travel managers will be able to stayahead of the curve when it comes topreferred supplier agreements,placing them in a more favorableposition when the time comes tonegotiate.
Lookingbeyond thehorizon
Air prices in North America areexpected to rise. A slow and steadyrise of 2.3% is anticipated for theregion in 2020. This consistent growthreflects the underlying strongeconomies of the US and Canada.
Unions are in the midst of negotiationswith carriers for pilots andmaintenance contracts, many ofwhich will be eligible for renewal in2020. Pay raises will have airlineslooking to make up their costs
elsewhere. Upping ancillary costs willcover some of the spend, but it islikely that airlines will need to look atairfares as well.
Most airlines are looking to ancillaryfees as a way to stay competitive.Costs of services like WiFi, loungeaccess and frequent flyer levels maybe up for negotiation for corporatetravelers. Travel managers should be
prepared to strike a balance betweenprice and providing the mostproductive traveler experience foremployees.
Building a clear picture based ontraveler data will help travel managersto ensure this balance is met, even intimes of uncertainty. Advancedpurchases and online booking can
help drive down costs as can having aclear travel class policy for employeesthat identifies the lowest logical farefor each journey.
A new type of investor?In Canada, we are seeing a slightly different story. A more aggressive pricerise of 3.2% (based on USD) is expected, primarily due to private equity firm,Onex, paying over the odds for Canada’s Westjet in a $5 USD billion deal,doubling the share price of what the market was asking; a first in theindustry. To help make their money back, we will see a rise in prices acrossthe board in the country, with domestic economy taking the brunt of thiswith a predicted 5.7% rise in prices.
While the projected price rise for business class flights is less dramatic, thebuyout is likely to affect airfares and ancillary charges over the next few yearswhile the market rebalances.
If successful, this deal may lead to private equity companies looking moreclosely at airlines as investment opportunities, opening the door for the airtravel industry to enhance their margins, expand routes and increaseflexibility.
Striking abalance
Overall the hotel industry in NorthAmerica has seen slow, but steadygrowth in Average Daily Rates (ADRs),which looks set to continue into 2020and beyond. With the number of newhotels that have been built andopened, however, the demand forrooms is now aligned with the supply,which will translate to a small
slowdown in the region. We will seeADRs growing at closer to 2% year-over-year rather than the 3% we haveseen in the recent past.
This gradual slowing will help ratesreturn to normal, correcting the over-inflated prices we have seen in someof the major cities over time.
The techsector effectInterestingly, while technology-focused areas - like San Francisco, SanJose, Seattle and Vancouver – are still
seeing growth, it is not as high as ithas been historically. Demand in thesecities has been high for so long thatprices have been absurd, and we havestarted to see business travelersstaying further out to combat theseprice pressures. It is similar to whatNew York City experienced six to eightyears ago when ADR growth went flatand then to negative growth.
Filling rooms with heavily discountedcorporate rates is unsustainable forhotels; consequently, we may start tosee the technology giants movingaway from traditional hotel stays.This shift is one explanation for whygrowth rates across the board have
been relatively flat, ranging from 0-5%rates instead of the near double-digitgrowth from 0-9% that we have seenin past years.
Room fornegotiationThis slowdown can be an opportunityfor more aggressive negotiations,allowing the expansion of currentofferings and finding that sweet spotbetween cost efficiencies and travelerexperience – a much more importantfactor with millennials. This group willmake up nearly 50% of the currentAmerican workforce by 2020 and 75%of the global workforce by 2025.
Business travelers tend to fall into twocamps – the more traditional, olderones who are generally more brandloyal and prefer to stay in their favoritechain wherever they go. They know
what to expect and can reap thebenefits of loyalty points to make theirstays productive and comfortable.
The younger workforce tends to blendbusiness and leisure, and prefer lessluxury ‘cookie cutter’ hotels in favor ofrelaxed, boutique-likeaccommodations that can double ashang out and co-work spaces. Hotelchains are responding withaccommodations that match these
preferences – and often at a lowerprice point. While location is still attop of the list, we are seeing youngertravelers happy to stay a bit furtherfrom the city center for business.
Fees canadd upSimilar to airlines, hotels will be
looking for alternative ways to makemoney, including keeping businesstravelers working in their lobbies andeating in their restaurants. On the flipside, cancellation policies arebecoming stricter and travel managersand travelers need to ensure they readthe fine print. We are seeing largerchains charging cancellations fees asfar as 72 hours in advance, rather thanthe previous standard of 24 hours.
Stayinggrounded
Predictably, the car rental market hasseen a 1% increase in North America.Due to the nature of long-termcontracts, we are unlikely to see anyupward trends in pricing until 2021 or2022. While we do expect prices torise, we do not anticipate dramaticones as long as the residual costsremain stable.
Traveler preferences are dictating achange in car preferences, shiftingaway from traditional sedans in favorof more versatile SUVs and trucks.Newer cars mean more technology,which translates to more convenienceand better performance, but doescome at a cost – specifically,maintenance. Maintenance and repaircosts to fleets are on the rise and,combined with the change in fleetmix, will likely have a knock-on effecton prices in the coming years, leadingto cost increases in the future.
ConnectedcarsGround transport tends to be the areathat has the least clear view of travelerspend and, therefore, needs to lookcarefully at all rate components. Thetransparency of connected cars willhelp to correct this gap in knowledge
and give both travel managers and carrental companies the ability to trackeverything from miles, fuel levels anddamages to cars. This increasedvisibility will help companies chargemore accurately and recover costswhich should help lead to moreequitable and accurate pricing. With aview into the data, better rates can benegotiated based on on-time returnrates and safe driver discounts.
What is nextfor the sharingeconomy?Transportation Network Companies(TNCs), like Lyft and Uber, are nearlyubiquitous in North America, andmost corporate travelers are happy torely on these in urban areas as they
are on-demand and often less hasslethan renting a car – especially forshorter trips. But they are notnecessarily a threat to car rental costs;any business rental companies lose tothe sharing economy they make up forby providing fleets for Uber and Lyftdrivers.
And for those rental companies withoffices more than four miles away, carrental companies are starting to pay
Uber or Lyft drivers to take passengersto their offices to pick up their rentalcars. This helps the rental companiesto save money on office space andshuttle costs, making the relationshipbetween car rental companies andTNCs more symbiotic thancompetitive.
Recognizing the importance ofpartnerships, TNCs will also continueto work with businesses to create
managed rideshare programs. Withdedicated account managers and trustand safety teams, these programs aimto help organizations to reduce costs,provide employees with exclusivediscounts and perks, and ensure theyhave the tools and support they needto manage their travel programseffectively.
2020 visionA look into the technology shaping the futureof business travel.
Click here or press enter for the accessibility optimised version
Data in yourfingertips(and your face,eyes, and cars)Efficiency is paramount forbusiness travel.
SeamlesstravelWhether it is waiting for a taxi,checking-in for a flight, or on thejourney itself, time spent not workingimpacts the productivity of employeesand can result in business travelbecoming an expense, rather than aninvestment. Technology aimed at
reducing traveler downtime continuesto evolve and we will see moreapplications aimed at making thebusiness travel process more fluid,efficient and productive into 2020 andbeyond.
Wading through reams of data can beat best, time consuming, at worst,counterproductive. As a result, we areseeing the adoption and developmentof artificial intelligence-powered tools
across the travel industry. User-friendly search engine-like interfacesare being developed to sit on top ofcorporate travel databases to solvethis disconnect and make travel dataeasier to access and navigate. AI-powered chatbots and similartechnology also help navigate travelerpreferences and align these withcorporate policies.
Delayed trains and flights happen all
too often and can result in manywasted hours in stations or airports.Trip disruption technology ismaturing to help combat this.Businesses can subscribe to servicesthat provide up-to-the-minuteinformation about any changes to ajourney directly to the traveler’smobile devices, allowing them to planahead to minimize waiting times.Some third-party technologyproviders will also provide instantvouchers to access airport lounges theminute a lengthy, unexpected delay isannounced, providing a connectedbusiness-friendly environment for
travelers to get work done while theywait.
A number of biometric technologiesare being tested and used to make theimmigration and security processes atairports more seamless – and secure.And with air passengers set to doubleby 2036, it cannot come soon enoughfor business travelers.
Already being trialed to speed up theboarding process, facial recognitiontechnology is being piloted atinternational airports to speed upimmigration checks and increase
accuracy at border control. Otherbiometric technologies likefingerprint and retinal scanning,while not new, are starting to reachcritical mass, being adopted as part of‘smart airport’ schemes around theworld to reduce security queues.International airports like WashingtonDulles are also investing heavily inautomation like mobile passportsand increasing the number of mobileentry kiosks to help keep passengersmoving through airports withoutcompromising on safety.
Airports recognize the value of time
and many are engaging inpartnerships with airlines and withcorporate travel managers directly,educating them about the emergingtechnology on offer – all with the aimto provide a smoother, moreexpedient airport experience forbusiness travelers.
Automated check in/check outtechnologies make hotel stays forbusiness travelers easier and moreproductive by eliminating long linesand complex payments. Services likeConichi’s Smarthotel allow travelers toarrive at their hotel, pick up their key
and head straight up to their room. Noneed for waiting in line at a desk.Check out is similarly quick – travelerscan leave their key and go – andthanks to centralized billing, they donot have to worry about makingpayments or having to expense thecost themselves to claim back later.
And travel managers benefit frommore accurate invoicing and access totraveler data, allowing them to betterunderstand individual preferences tohelp provide a smoother, moretailored service to frequent travelers.
While all of these individual
technologies are helping makebusiness travel smoother and moreproductive, connecting them so theyall work together is essential to createa truly seamless travel experience.Data is at the heart of most traveltechnology and integrating everythingfrom traveler booking preferences to
flight prices, car specs, fuel prices andhotel rates requires huge amounts ofbandwidth and versatility. Enterblockchain – the key to poweringbusiness travel.
Blockchain– the key tofrictionlesstravelThe venture capitalist community hasstarted to discover how lucrativetravel technology can be. According toTechCrunch, travel companies haveraised $1 billion in VC funding aloneover the last five years. In 2018, wesaw the first travel tech ‘unicorn’ – thetech start-up term for businessesvalued at $1 billion; not to mentionthe recent IPOs of ride sharingservices in 2019 of Lyft and Uber.
With investors and tech developersprimed for success, it is safe to say wewill be seeing a lot of travel innovationin the coming years. But even withnew apps and platforms promising to
disrupt the current travel market thetechnology that is poised to have thegreatest impact on travel – and totransform it – is blockchain.
Blockchain, like the travel industry,thrives on data. Blockchain is an open,distributed highly secure database. Or,as Forbes notes, “Basically it's acomputer file used for storing data
that is duplicated entirely across manycomputers.” Without delving too farinto how it works, as a distributeddatabase, blockchain does not have asingle controller. This makes it moresecure (its encoding is virtuallyimpossible to crack), flexible andpowerful. It is no coincidence thatblockchain has been hailed as ‘thenext internet’ and the travel industry
is already starting to harness itspower.
Blockchain decentralizes, andtherefore democratizes, data. It willtransform the way we makepayments, enable rewards, dobusiness - and all for a fraction of thecost. In short, blockchain will be thekey to frictionless travel.
Methodology
Click here or press enter for the accessibility optimised version
A statistical model, developed byGBTA with market and economicresearch firm, Rockport Analytics,that evaluates historical pricebehavior and forecasts future pricesin the air, hotel, and groundcategories.
The market-specific expertise andtravel industry knowledge of CWTand CWT Solutions Group personnelworldwide.
Information sourced from Moody’sAnalytics, the InternationalMonetary Fund ResearchDepartment, the United Nationsand other leading organizations.
Projections are based ontransaction data from CWT’s globalclient portfolio, including clients’travel footprints and patterns, overthe past ten years. Keymacroeconomic and per-countryindicators, such as current andexpected GDP growth, theconsumer price index,unemployment rates and crude oilprices, were used in the statisticalmodel, as well as key supply-sidedrivers sourced from OAG and STRGlobal. All air statistics representpoint of origin and include all triptypes (long and short haul/domestic, continental andintercontinental).
MethodologyThe projections in the 2020 Global TravelForecast are based on: About CWT
CWT is a Business-to-Business-for-Employees (B2B4E) travelmanagement platform.Companies and governments relyon us to keep their peopleconnected – anywhere, anytime,anyhow – and across sixcontinents, we provide theiremployees with innovativetechnology and an efficient, safeand secure travel experience.Every single day, we look afterenough travelers to fill more than100,000 hotel rooms, while ourmeetings and events divisionhandles more than 100 eventsevery 24 hours.Please follow us on Twitter,Facebook and LinkedIn.
About GBTA
The Global Business TravelAssociation (GBTA) is the world’spremier business travel andmeetings trade organizationheadquartered in the Washington,DC area. GBTA’s 9,000-plusmembers manage over $345 billionof global business travel andmeetings expenditures annually.GBTA delivers world-classeducation, events, research,advocacy and media to a growingglobal network of more than28,000 travel professionals and125,000 active contacts. To learnhow business travel drives lastingbusiness growth, visit gbta.org.
Foreign exchange forecast
Click here or press enter for the accessibility optimised version
2020 foreign exchange forecastby country year-over-year growth vs United States Dollar
Additional travel price data and footnotes
Click here or press enter for the accessibility optimised version
AirAdditional travel price data
AirEurope, Middle East & Africa
AirLatin America
AirAdditional travel price data
HotelAdditional travel price data
HotelAdditional travel price data
HotelAdditional travel price data
HotelAdditional travel price data
GroundAdditional travel price data
Asia Pacific ground price projections
GroundAdditional travel price data
GroundAdditional travel price data
GroundAdditional travel price data
Click here or press enter for the accessibility optimised version
Thank you for reading.
Want to share the report? Click below.
2020 Global TravelForecast
Cookies Terms Privacy P O W E R E D B Y
