Amex predicts ‘modest gains’ in business travel costs in 2016

The American Express Global Business Travel Forecast 2016 predicts air, hotel and ground transportation prices will see modest gains in 2016, as a slowly-improving global economy and stronger demand outpace increases in supply.

In 2016, the report predicts European air prices will remain relatively stable, with the exception of premium cabin travel costs, which are expected to tick higher. Variability persists across the region, however, the UK is poised for another strong year with steady demand and new routes being added among airlines. Air prices are expected to remain stable in the Nordic countries, despite the expansion of Low Cost Carriers (LCCs) across the region. Taking advantage of their new, highly efficient fleets, these carriers will put pressure on short-haul Economy fares. Continued pressure from both LCCs and Gulf carriers will place strong downward pressure on fares throughout Europe, particularly on short- and long-haul routes to Asia.

In 2016, hotel rates across Europe are expected to experience moderate price increases, as Europe’s economy stabilises and demand increases without much corresponding growth in inventory. Growth will generally be stronger in larger cities where the weaker euro is spurring increased tourism. In the Middle East and Africa, an increasing inventory of mid-range offerings will provide travellers with more affordable choices, but rates will still rise on stronger economics in 2016.

Led by favourable market conditions in North America and tempered growth in Asia, the airline industry will see slight pricing gains as increased demand is offset by similar growth in capacity, partially spurred by lower fuel costs. Global hotel performance is also expected to improve moderately in 2016, as limited increases in inventory fail to keep pace with the growing global appetite for travel. Overall, North America is expected to continue its momentum from 2015 and experience healthy rate increases, while Asia-Pacific and Europe will show moderate gains. Ground transportation rates are expected to remain relatively flat as overcapacity, strong competition and a continued focus on ancillary fees persist globally.

“While we expect modest increases in global travel prices heading into 2016, travel managers are operating in an era of new challenges and evolving disrupters,” said Caroline Strachan, VP, Consulting, American Express Global Business Travel. “In addition to handling tasks such as measurement and compliance, new factors such as the sharing economy and mobile booking channels are becoming increasingly popular for business travellers. In order to thrive in this digital era, travel managers need to be aware of and dynamically adapt to these forces across a variety of geographies.”