Throughout 2022, air fares are expected to rise by 48.5%, hotel rates by 18.5%, and car rental charges by 7.3%. But it doesn’t end there. The Global Business Travel Association and CWT further predicts that travellers are set to encounter an additional 8.4%, 8.2% and 6.8% increase for flights, hotels and car rentals respectively in 2023. Show According to the 2023 Annual Global Business Travel Forecast, the year-on-year changes in travel pricing are as follows:
“Labour 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,” said CWT CEO Patrick Andersen. Rising fuel prices, labour shortages, and inflationary pressures in raw material costs are the primary drivers of the price surge, according to the 2023 Global Business Travel Forecast. For air travel, the increasing demand for travel now that borders have reopened, alongside the rising costs of jet fuel which has more than doubled in some markets to over US$160 per barrel, according to S&P Global, is causing a spill over to passenger ticket prices. Hotel rates have accelerated across the world, including a 22% rise in North America, and a forecast of 31.8% across Europe, the Middle East & Africa, mostly due to high demand for rooms despite the continued capacity constraints. Accommodation costs had started increasing in 2021 driven by the beginning of the travel rebound. With business travel, whether in groups or individuals, improving by the day, there’s further pressure on average daily hotel rates. Car rental agencies have yet to recover from reducing its fleet sizes from the pandemic, resulting in a shortage of vehicles in the face of high demand. Corporate travel managers are increasingly looking at electric vehicles to combat both the rising prices of fuel and carbon emissions. When it comes to meetings and events, the pent-up demand has resulted in an increase of cost-per-attendee. Participants attending events in 2022 are expected to fork out around 25% more in costs than in 2019, and it's forecast to rise a further 7% in 2023. “Demand for business travel and meetings is back with a vengeance, of that there is absolutely no doubt,” said CWT CEO Patrick Andersen. Beside the pent-up demand for meetings and events, the event sector is also going head to head with other types of events that were cancelled during the pandemic. Shorter lead times for events are also contributing to the rise in costs. The report finds that global tourism arrivals will increase by 30% in 2023, following growth of 60% in 2022, but will remain below pre-pandemic levels. The economic downturn, sanctions on Russia, and China’s zero-covid strategy will delay recovery. Ana Nicholls, Director of Industry Analysis, EIU, says: “The tourism industry saw a strong recovery during 2022, and we expect that to continue in 2023, particularly if China starts lifting its zero-covid policy as expected. But the industry certainly won’t be immune to the economic slowdown. Costs have already risen sharply for fuel, electricity, food and staffing, and companies will have to pass those costs onto consumers who are already hurting from the higher cost of living. As a result, EIU has pushed back its forecast for a full recovery in international arrivals. We now don’t expect them to get back to 2019 levels until 2024, although the Middle East is one region that will be ahead of the curve.” Key trends to watch in 2023 include:
Tourism arrivals will rise by 30% globally Even so, the depth of the tourism slump in 2020-21 means that strong growth is nearinevitable in 2023 now that travel restrictions have been lifted in most countries. Globally, we expect pent-up demand for travel to drive growth of 30% in international tourism arrivals, taking them to 1.6bn. This follows growth of 60% in 2022, but will still not be enough to take total arrivals to their 2019 level of 1.8bn. However, the trajectory will differ by region. Much of the Middle East, buoyed by high oil prices, has already seen a full recovery, while Eastern Europe will have to wait until 2025 because of the impact of the war in Ukraine. Other regions will range in between, with most reaching a full recovery in 2024. Chinese travellers will remain largely absent In this scenario, we expect the number of outbound travellers from China to more than double in 2023, to around 59m. Even so, that would be only a little more than a third of the 155m departures in 2019, when China was the world’s biggest source of tourists. This reduced demand will primarily affect tourist destinations in Asia, including Thailand and Hong Kong, which used to be highly dependent on Chinese visitors. But the dampening effect will also be felt in Europe, the US and elsewhere. Even China’s domestic tourism - which also fell in 2020-22 - will be affected by the country’s economic slowdown. We expect GDP growth of “just” 4.7% for China in 2023, which will feel like a recession in a country used to strong growth. Labour shortages and high prices will add to woes The UK faces particular issues, because Brexit has stemmed the flow of seasonal workers from the EU. However, there are also labour shortages across Europe and in the US, where employment in the leisure and entertainment industries is still nearly 1m short of 2019 levels. The economic slowdown should make recruitment easier if job losses mount elsewhere. Several countries, including New Zealand and possibly the UK, will also ease visa requirements. Even so, it will take time to replace skills lost during the pandemic. Moreover, this labour-intensive industry is also likely to see more disruptive strikes in 2023 as workers themselves demand higher wages to cope with the higher cost of living. Airlines will edge closer to profit Despite the difficult economic conditions, the signs for 2023 are brighter, and IATA suggests that airlines may even head towards profitability if travel rebounds as expected. One big risk will be fuel costs: although oil prices are now softening, they are priced in US dollars, and the dollar is strengthening against nearly every currency. As a result, US-based airlines are the most likely to be profitable in 2023, while airlines in other regions will struggle. The impact of climate change will increase Travellers’ awareness of the environmental consequences of tourism may also change their travel plans in 2023. According to the European Investment Bank, 37% of Chinese people, 22% of Europeans and 22% of Americans say that they will avoid flying because of climate-change concerns. Some of those who still want to travel will be prepared to pay higher prices for more eco-friendly options, or carbon-offsetting efforts. Regulators will pile on the pressure too. 2023 will see the conclusion of the voluntary pilot phase of the Carbon Offsetting and Reduction Scheme for International Aviation to reduce emissions from international flights. Eight more countries, including Cambodia, Cuba and Zimbabwe, will join, bringing the total number of participating states to 115. To watch
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