If you’re a frequent business traveler, you’ve likely noticed some pain in your wallet (or your T&E account) lately. As your company’s chosen Travel Management Company, we want to provide some insights into recent price hikes, what’s driving costs up, and a look ahead to what you can expect for business travel in 2024.

Changing Industry Dynamics

First, the sticker shock. Airfares absolutely soared in 2022, far exceeding forecasts. We saw average global ticket prices rise over 50% last year. For example, economy air tickets went up more than 54% on average globally. Hotels and rental cars also saw major jumps, with midscale hotel rooms increasing 24% on average. Why such a huge swing? A “perfect storm” of factors — pent-up demand after lockdowns eased, stubborn inflation, supply chain troubles limiting capacity, and more. The good news is experts believe price growth will level off moving forward. But make no mistake, business travel will remain pricier compared to early pandemic rates.

Sector Analysis

For air travel specifically, constrained airline capacity continues hampering supply in the face of red-hot demand. That imbalance lets carriers keep fares elevated. Europe saw particularly high average ticket prices over the last year, with the average reaching $855 in the region. Asia Pacific recorded a staggering 148% annual jump in airfares. Premium air cabins also saw especially sharp climbs, like a 63% rise for premium seats in Europe.

As for hotels, daily room rates climbed nearly 30% globally in 2022. North America led the surge with an eye-watering 33.8% rate hike. Upscale properties, rising 31.9% in Asia Pacific for example, led the charge.

And rental car companies, still rebuilding fleets after pandemic cutbacks, pushed prices up almost 10% last year through scarcity. North America saw rates jump 11.4%.

What does this mean for you? Expect to keep seeing higher business travel costs in 2024 than you’re used to. With economic uncertainty continuing, airfare and hotel rate increases should moderate, but remain above inflation. As for rental cars, lean inventories will likely sustain prices for another couple of years.

Drivers of Change for 2024

The global economy is slowing down, with the IMF forecasting the lowest medium-term growth rates in 30+ years. This will likely moderate future business travel price increases. 

Consumer demand for leisure travel remains very strong. Most people plan to keep up or increase their spending despite economic uncertainties. This sustained demand creates upward pricing pressure.

Stubbornly high inflation has raised supplier operating costs. Some of these increased costs get passed on to travelers. Inflation should ease somewhat in 2023-24 but remain elevated.

Rising interest rates are impacting travel suppliers’ financing costs for things like leasing vehicles and airplanes over the next couple years, affecting pricing. 

While falling from peaks, still-high energy prices have hurt bottom lines for transportation providers and hotels. Ongoing high costs get factored into pricing models. 

Labor shortages across the travel industry are also pushing up wage bills and subsequent prices. 

Emerging Trends for 2024 Business Travel

Key trends driven by high prices include trip batching, blended business-leisure trips, growing focus on emissions from travel, and a shift towards premium offerings as capacity for lower priced economy options gets squeezed.

Inclusion and sustainability are also becoming important priorities for businesses. Corporations are increasingly willing to budget for diversity of choice, such as vegetarian menu options, and include Environment, Social and Government (ESG) factors when planning meetings and events.

Despite challenges, businesses still heavily value travel for in-person meetings and events to build bonds quickly. 90% of companies strongly agree on their importance compared to virtual interactions. We’re here to make that happen. Leaning on our decades of experience, we negotiate with suppliers daily to get clients the best available rates. And we can assist businesses customize travel policies around what matters most — whether that is bottom line savings, traveler well-being, sustainability, or other goals.

The skies may stay turbulent for a while. But by working together, we can weather the storm in route to clearer skies ahead. Bon voyage!

Source: GBTA 2024 Global Business Travel Forecast – Now in its ninth year the current CWT-GBTA forecast seeks to help businesses gauge market pricing for average hotel rooms, airfares businesses gauge market pricing for average hotel rooms, airfares and car rental, as well as meetings and events. The forecast also explores where prices are heading, as well as the drivers of change. All prices quoted are in US dollars.