International flights are taking off – and so are prices

From next week Australia will re-open the doors to the ‘lucky country’ and welcome back travellers and visa holders under new rules for those fully vaccinated.

The return of Working Holiday Makers (WHMs) will help breathe some relief into the Australian tourism and agricultural businesses facing labour shortages since COVID-19 was declared a national emergency.

Australia is allowing fully vaccinated New Zealanders into the country, but quarantine-tree travel the other way remains all but “grounded” with the travel corridor in doubt due to the grip of COVID-19.

Roughly 20,000 travellers seeking to cross the Tasman before Christmas have had their plans scuppered with the cancellation of 1,000 flights by Air New Zealand.

With more “wheels going up” with planes hitting the skies, travel prices for business and pleasure are rising as the holiday period approaches and passports are dusted off.

Let’s take a look at some of the considerations for travel buyers.

So will this affect travel budgets in 2022?

Adobe Digital Economy Index, has reported in the US domestic flight prices in October 2021 were just 7% below pre-pandemic 2019 levels.

Looking ahead at the global landscape in 2022, the cost of hotel beds will surge by 13 %, flight prices by 3.3 % per cent and ground transportation is set to rise by almost 4 %.

The surge in costs is primarily driven by increasing demand, capacity constraints, and travellers’ sustainability demands, plus increased labor and fuel costs, according to the seventh annual Global Business Travel Forecast by CWT and GBTA.

“While the best-case scenario for 2022 is for further recovery of business travel across all areas, not all markets, nor all categories, will recover at the same pace, so business travel managers will need to understand what to expect as we look at the year ahead,” Suzanne Neufang, Chief Executive Officer of GBTA says.

What’s the macroeconomic influences on travel?

CWT and GBTA state the global economy is expected to grow 5.9% by the end of 2021, followed by 4.9 % in 2022, spelling growth for business travel.

However, several uncertainties remain on the periphery that could influence the macroeconomic outlook and the global travel economy.

The macroeconomic forces of government policy, and COVID protocols will continue to be in the melting pot more than ever before.

“The business traveller may find themselves in a price competition with the leisure traveller – who is leading the recovery and willing to pay higher prices on key city routes and destinations,” CWT and GBTA  say.

Air pricing

After rising 2.6% in 2019, air fares fell 3.1% in 2020 and 31% for business travellers. This was led by a 38% downturn in premium class, followed by near 19% decline in economy seats this year.  The 3.3 per cent price rises are expected to swell by a further 3.4% in 2023, when pre-pandemic levels could return.

Other factors, include higher oil pricing on increases operating costs which CWT and GBTA said would continue to put pressure on fares as airlines seek to improve profitability . In 2022 corporate travel policies will also be a factor in the recovery of air fares on corporate-heavy rates.

Hotels

After rising 3.5% in 2019, hotel prices plunged 8.3% in 2020 and an additional 17.7% in 2021, with prices  down from 2019 levels by approximately 25% (as of quarter three.)

A global hotel price rise of 13% in 2022 is expected to be topped by a further 10% in 2023.The firming of hotel pricing to 2019 levels may fluctuate until these factors become more consistent.

Corporate meetings and events, which have traditionally bolstered the balance sheets of hotels, will also impact hotel pricing but virtual and hybrid meetings have taken a slice of business. There’s also been a shift to smaller regional meetings being preferred opposed to larger events involving travel.

“The overall meeting size of live meetings dropped from an average of 42 attendees per meeting in 2019 and 2020, to an average of 24 attendees in 2021,” CWT and GBTA said. Demand for meetings and events is on the rise and has increased 53% for the first half of 2022 from 2021.

Car rental 

Global car rental prices fell 2% in 2020 and recovered 1.2% this year.  Pricing is expected to increase 3.9% in 2022, and an additional 3.0% in 2023.

The glut of new car supply, lack of semiconductors, combined with a boost in demand for rental vehicles, will drive higher price rises in the short- to medium-term, the forecast said. This may leave fleets to be unlikely to be fully replenished until 2023.

Read the Global Business Travel Forecast.