Global economic uncertainty, including the risk of another recession in the euro zone, has led BCD Travel’s independent consulting arm, Advito to lower its 2012 forecast for airfare prices in Europe. At the same time, Advito expects tight inventory and strong demand in emerging markets to drive higher costs in Latin America and Asia.
Advito’s update to the 2012 Industry Forecast, released in September is based on an assessment of current economic parameters, including year-over-year booking data from the fourth quarter. Since release of Advito’s original 2012 forecast, shifting market forces have pushed prices down in some regions and pulled them up in others. Although European financial woes mean France’s credit rating has been downgraded and the U.K. is teetering on the edge of another recession, overall corporate travel demand has held steady.
“Travel program managers need to keep their eyes on a range of factors in 2012 that could affect their total cost of air travel,” said Bob Brindley, vice president for Advito. “To name a few—fuel surcharges, ancillary fees and card payment fees. In addition, airline mergers and joint ventures carry significant risks for corporate travel programs.”
Originally predicting a 3 percent to 5 percent rise in airfare worldwide, Advito now expects price hikes for intercontinental business and economy travel in Europe of no more than 3 percent. Business-class airfare within the region will rise by only 1 percent. By contrast, Advito anticipates intercontinental airfare in Latin America rising by as much as 7 percent (up from previously projected 4 percent) and regional travel rising 8 percent (up from 5 percent). The upward adjustment is driven by increasing corporate demand and continued capacity decline by airlines.
Other key findings in Advito’s February Update to the 2012 Industry Forecast include:
- Airfare for regional economy class in Asia-Pacific will rise by 9 percent (up from last year’s 5 percent forecast)
- Airlines are likely to further cut capacity in 2012, following as estimated 2 percent year-over-year decline in the last quarter of 2011
- Averaging US$104 last year, the price per barrel of oil has once again dipped into double digits, settling around US$99 at the time of writing
- Brazil will see the strongest year-over-year increase in hotel average daily rates (ADR) from 18 percent to 20 percent
- The ADR of hotels in Latin America, the Middle East and Asia will rise an additional 3 percentage points above September projections
For more detailed information on key trends in travel management for 2012, as well as recommendations for travel buyers, please refer back to the original Advito 2012 Industry Forecast.