We have resisted. We have not felt we had the expertise to effectively look at our crystal ball and determine what will happen at some point in the future. But we have changed our tune. This year is our first forecast for the future of travel spend all over the world.
This forecast is based on the following key inputs:
a) General Research: What are global organizations like the IMF and World Bank predicting for general economic growth?
b) Targeted Research: Using a team of students and professors, we have looked at specific factors that impact business travel.
c) Industry Research: Drawing on a vast network of industry professionals, we have used their input to drive our resulting predictions.
So the result is our view of what the future will hold for three key pieces of travel spend - air, hotel and car. We have broken the predictions into five regions of the world. Even breaking down the world into five regions was not easy - one country may be dramatically different than the rest of the region - but we understand that shaping budgets requires this level of focus. The final premise is simple: How can we make an educated guess with regards to business travel growth based on what we know today?
Air: +3.5% Hotel: +5.0% Car Rental: +3.0%
There continues to be a lot of uncertainty in North America, driven primarily by the United States. What is the economic outlook and how will the elections shape those predictions? Most global think tanks are predicting economic growth in the US at somewhere between 1.5% and 2.0%. What is likely in the business travel industry is a continued strong management of all inventory, resulting in modest price increases. However, there are those that are questioning the continued escalation of prices due to reductions in demand - travelers and businesses are electing to severely limit travel because of the high prices - thus keeping dramatic price increases in check.
Air: +2.0% Hotel: +5.0% Car Rental: +2.0%
Latin America continues to show strong economic growth as their economies are fueled by commodities. While the predictions for overall economic growth reflect a stronger 4.0%, we temper that in air and car due to strong competition in all markets of Latin America. On the other hand hotels should be able to drive prices up based on the increased demand for them and lesser supply. There are some Latin American countries that could impact these predictions based on their governmental organizations, but overall these are sound outlooks for this region.
Air: +3.5% Hotel: +2.0% Car Rental: +2.0%
Europe is a tough one to predict. All indications for overall economic growth are that this is a very stagnant economy, with fears of financial meltdowns driving predictions of no growth to moderate growth of only 1%. The challenges of the economy therefore drive the predictions for travel and business travel specifically, resulting in moderate growth for both hotel and car.
However, the predictions are greater for air growth in pricing because the drivers of this segment, like competition and supply, result in stronger increases for air travel in Europe. This region will be interesting for sure in 2013.
Middle East and Africa
Air: +2.5% Hotel: +1.0% Car Rental: +1.5%
The opportunities for sound growth and opportunities do exist in the Middle East and in Africa. However, some of the optimistic outlook is tempered by the political landscape and the chance of conflict in the region. Air carriers in the region will control their inventory to reflect the demand and therefore will have the opportunity to raise prices moderately in some markets. Demand for hotels and car rentals will continue to be weak due to an overall downturn in tourism resulting in bargains for business travelers.
Air: +3.5% Hotel: +3.0% Car Rental: +4.0%
Asia is the region currently driving global growth. As a result of this demand, travel suffers the greatest increases in price for 2013 versus other regions of the world. Emerging countries (like India and China) in this region are growing rapidly, but there is the threat of a downturn based on some indicators in those countries - they have been growing so fast and so long that some expect an adjustment that may temper these forecasts.
SummaryTo answer our premise, we can only offer predictions on business travel growth based on the data we have available to us today along with our knowledge of what has happened in the past under the same or similar economic conditions. While some unexpected global events could skew these estimates, we believe this is a solid forecast for business travel in 2013.