After posting sharp rises in 2019, prices in the global travel industry are likely to slow in 2020, with flights rising a modest 1.2%, hotels rising only 1.3%, and rental car rates up 1%, according to the sixth annual Global Travel Forecast, published today by travel management platform CWT and the Global Business Travel Association (GBTA).
While the global economy is doing well overall – and expected to grow a solid 3.6% in 2020 – the forecast suggests a raft of uncertainties are set to put a damper on pricing.
“The risks and ambiguity have increased over the past few months – not least the threat of escalating trade wars, the impact of Brexit, possible oil supply shocks, and the growing likelihood of recession,” said Kurt Ekert, CWT’s President and CEO.
The 2020 Global Travel Forecast uses data generated by CWT Solutions Group, to give an early look at the trends and developments that will shape the business travel industry in the year ahead.
“Technological advancements and an increasingly volatile economic and political landscape across the globe have changed the way today’s travel buyers need to do their jobs,” said Scott Solombrino, GBTA COO and Executive Director. “This annual forecast provides insights into the key drivers forcing these shifting priorities and gives a road map for travel buyers looking to plan their 2020 travel programmes.”
In terms of regional trends identified, the forecast finds Asia’s expansion has slowed down due to worsening US-China relations, tighter global financial conditions, and natural disasters. But the region remains the most dynamic, with steady GDP growth, benign inflation, and a sense of optimism.
In Asia Pacific, the shutdown of India-based Jet Airways’ operations in April created a gap in the market for some key routes, and the reduced competition has meant higher airfares.
Hotel investment volumes in the region are predicted to grow 15% year-on-year. Japan will host the Rugby World Cup later this year, and the Olympic and Paralympic Games in 2020 and the Japanese hotel market is seeing a sharp increase in supply to accommodate the anticipated surge in visitors to the country during these events.
Across Europe, labour unrest, climate change protests, global trade wars, rising oil prices and regional terrorism all have the potential to cause a slowdown, the report finds.
Denmark and Egypt are countries to watch, with hotel prices in Denmark expected to fall next year. On the other hand, Egypt’s rates are on the up – projected to rise by 4.7% – as its economy settles down after a period of unrest.
Economic activity in Latin America continues to grow, meanwhile, albeit slower than anticipated – and is expected to rise 2.5% in 2020. A volatile political and economic situation in some of the largest economies like Argentina, Mexico and Brazil will hurt prospects, the report forecasts.
Several new air carriers have entered the market, however, and low-cost carriers have gained significant share in Brazil, Mexico and Colombia.
Following a steady decline in new hotels on the continent from a 2015-2016 peak, things may be picking up, with Mexico leading the way. More than 10 new corporate chain hotels opened in the region in the first quarter of 2019 with growth set to continue throughout 2020. Properties in Mexico and across Latin America are likely to continue to cut prices.
The US economy is thriving, but there is growing uncertainty, due to tariffs and trade wars. US GDP growth is set to slow to 2.1% in 2019, and slow further in 2020 and 2021, to 2% and 1.8%, respectively.
Flight prices are expected to rise, reflecting the strong economies of the US and Canada. Most airlines are looking to ancillary fees as a way to stay competitive, so costs of services like Wi-Fi and lounge access may be up for negotiation for corporate travelers.
Technology-focused areas – like San Francisco, San Jose, Seattle and Vancouver – are still seeing growth. However, demand in these cities has been high for so long that prices have risen too far – and business travelers are staying further out in response.
Due to the nature of long-term contracts, we are unlikely to see any upward trends in pricing until 2021 or 2022.
The 2020 Global Travel Forecast can be downloaded now.
The projections in the 2020 Global Travel Price Forecast are based on a statistical model developed by GBTA with market and economic research firm, Rockport Analytics, as well as industry knowledge of CWT and CWT Solutions Group personnel worldwide.
Information was also sourced from Moody’s Analytics, the International Monetary Fund Research Department, the United Nations and other leading organisations.