Corporate travel seeing double-digit increase in demand

Atlanta, 25 March – Corporate travel saw a double-digit increase in overall demand in the first quarter of 2010, according to an update released today to the 2010 Industry Forecast, published by BCD Travel consulting unit Advito. Though overall demand is up, the quarterly update reflects a “two-speed recovery” in advanced and emerging markets. Category-specific forecast revisions highlight a distinction in recovery between advanced (sluggish) and emerging (vigorous) markets.

Other key findings in the forecast revisions include:

  • Stronger than anticipated growth in Asia-Pacific airfares across all categories.
  • An anticipated drop in regional business class airfares in Europe.
  • An anticipated further drop in hotel average daily rate (ADR) in key markets resulting from rising supply and sluggish year-over-year recovery.
  • A rising impact in 2010 by no-show fees for rental cars.

Advito’s revisions to the 2010 Industry Forecast are based upon a reassessment of economic parameters on which its initial forecast was based, as well as, an analysis of year-over-year booking data from the previous quarter. In addition to its revised outlook, the first quarter update to the forecast provides a high-level view into key recent industry and market developments that may have an impact on corporate travel buyers.

Key findings in Advito’s 2010 Industry Forecast update for the first quarter for specific categories include:

Air Outlook

  • In Asia-Pacific, Advito now predicts that 2010 airfares will increase by 1 to 2 percentage points over previous forecast figures across all categories of travel. The revision follows faster than anticipated recovery from the general economic downturn driven by relatively buoyant growth in China.
  • In Europe and Africa, Advito is now forecasting a drop in regional business class airfares, moving from a slight increase to a net decrease in both regions, as a result of a continuing fall in demand. Because of continuing pressure on costs within travel programs, Advito does not expect short-haul premium cabins to recover.
  • In the Middle East, heavy capacity increases will leave carriers struggling to fill seats, leading to a revision in our forecast for intercontinental economy class airfare, shifting from a 3.5% increase to parity (0%).
  • Airfare forecasts for North America and Latin America remain unchanged.

Hotel Outlook

  • As predicted in the original forecast, 2010 will remain firmly a buyer’s market for corporate hotel programs.
  • Advito is revising downward its 2010 predictions on average daily rates (ADR) for the following key markets: Brazil, China, France, Germany, India, Spain, the United Kingdom and the United States. The revision results from the gradual pace of economic recovery in key advanced economy markets; an increase in capacity in key emerging markets as hotels complete building projects commissioned during the boom years; and sluggish or nonexistent stabilization of ADR in the second half of 2009.

Car Rental Outlook

Corporations should prepare for potential additional costs tied to no-show fees for rental cars in the U.S. market in 2010. The updated forecast follows Avis Budget Group’s announcement that it will implement the addition of required credit card information to rental car bookings with the group.

Key Industry Developments

In addition to its revised outlook, Advito’s first quarter update to the 2010 Industry Forecast also provides a high-level view into key recent industry and market developments that could affect decisions among corporate travel buyers.

Airline alliance contracts

Advito is increasingly seeing pressure being placed on buyers to accept joint venture contracts in place of contracts negotiated with individual carriers. The finding follows the growing dominance of anti-trust immune joint ventures among members of the three major airline alliances.

Joint-venture contracts may lead to more carriers than are needed in the corporate travel program, harder-to-hit targets and direct competition among preferred carriers. The result is an increased risk of program dilution. Advito advises clients to continue pursuing independent negotiations with carriers to ensure optimal coverage.

Current joint-venture contracting discussions have centered on the domestic American and transatlantic markets. However, recent applications for anti-trust immunity by American Airlines /Japan Airlines and Continental Airlines/United Airlines/ANA All Nippon Airways are carrying the debate to the transpacific market in 2010.

Meetings and events

After a significant fall in 2009, meetings and events bookings in the United States to date in 2010 are also 10% higher than for the same period in 2008. Although pricing has not started to shift, Advito is seeing some indications of supplier confidence that prices will trend upwards as the year goes on. Suppliers are making an effort to include stricter penalties and attrition clauses in their meetings and events contracts, and are increasingly unwilling to sign multi-year contracts.

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