As you create budgets for 2018, wouldn’t it be nice to have a firm idea of what your business travel expenses will be? While a precise travel budget is impossible, the 2018 Global Travel Forecast from the Global Business Travel Association (GBTA) provides a helpful snapshot of what you can expect next year.
Be sure to look at the full report as compiled by the GBTA and its partners. And here are key takeaways as you plan for 2018 and forecast your company’s business travel expenses.
A Growing Economy Means More Business Travel and Higher Prices
The economy gives businesses good and bad news. The good news is that the economy is expected to grow globally at 3.6% in 2018, as forecasted by the International Monetary Fund. The global economy grew at only 3.1% in 2016, its lowest rate since 2009. This year saw a jump to 3.5%, and the IMF’s forecast shows encouraging and continued growth.
But the bad news is that a growing economy means higher prices for business travel. Healthy markets around the world mean consumers and businesses are spending more freely. Hence, airlines, hotels, taxis and other business travel suppliers need to make fewer concessions to attract customers.
Here’s a breakdown of what to expect in 2018 in each of the big 3 business travel categories: air, hotel and ground transportation.
Airlines in 2018
The global airline industry will grow at 7% in 2017, with an additional 6% growth expected in 2018. Part of this growth is due to the further segmentation of pricing, including the introduction of basic economy fares by many carriers.
Your travel managers may be tempted to take advantage of these rock-bottom basic economy fares, but make sure the full cost is considered. While basic economy features a low upfront cost, these fares may end up costing much more as passengers pay a la carte for services that are typically included in higher classes (free checked bag, in-flight food and drink, etc.).
Airfares overall are expected to grow 3.5% globally. Expect big increases in Europe (a forecasted 5.5% in Western Europe and 7.1% in Eastern Europe), though North America will experience only a modest 2.3% spike in airfares.
Hotels in 2018
Mergers were the biggest news of 2017, including the mega merger between Marriott and Starwood. Expect the impact of these mergers to begin showing up in early 2018 as RFPs start to go out.
Companies that have worked with Marriott or Starwood in the past will now find that they have one representative for both companies. And it’s entirely possible that the merger may also lead to the elimination of a brand that has served as your company’s go-to when traveling to certain markets.
Also, expect hotel providers to continue pushing for dynamic pricing over the pre-negotiated rates that once served as a staple in corporate travel. Traditionally speaking, dynamic rates do not help buyers save money. Consider an arrangement that includes both pre-negotiated and dynamic rates, which may help both sides of the transaction feel like they’re getting “wins.”
Hotel prices overall are expected to rise 3.7% globally, again with heavy spikes in Europe (6.3% in Western Europe and 6.6% in Eastern Europe). North America will experience a relatively modest increase of 2.9%.
Any discussion of hotels and overnight stays in 2018 must include a note on the sharing economy. Airbnb and similar providers are struggling to gain traction in corporate travel, as government regulations promote traditional hotels over home or apartment sharing, and also because Airbnb and similar services lack the laundry, dining and security services that many business travelers rely on.
Ground Transportation in 2018
Just like airfares and hotel rates, the cost of ground transportation is expected to rise in 2018 — but only by 0.6% globally. North America will experience an increase of 1%, as will ground transportation users in the Middle East and Africa.
Volatile oil prices and stringent emissions regulations worldwide may influence the price of ground transportation in 2018. So too may the growing inclusion of new technologies and innovations, including self-driven vehicles, high-speed rail, green fuel alternatives and more.
While the sharing economy is struggling to take market share from hotels, it continues to gain traction in competition against traditional taxis. Uber, Lyft and other car-share services are experiencing 14% growth in 2017, and these providers expect another double-digit growth year in 2018.
Economic Risks for 2018
While the economy is expected to grow in 2018, next year won’t be without risks. Here’s a look at certain situations to keep an eye on as 2018 draws closer:
• U.S. Policy: Markets are expecting significant tax cuts as the new administration continues its first year. Markets could turn dramatically, though, if the push toward tax reform and new corporate tax policy falters or fails on Capitol Hill. The new administration could also curtail economic growth by moving forward with border adjustment taxes or any limitations on free trade.
• European Politics: The biggest shift in Europe is the expected departure of the United Kingdom from the European Union, though the impact of this departure should not be felt until 2019. In the mean time, changes in leadership throughout Europe could lead to shifts in the global economy, with perhaps the September 2017 election in Germany the most significant of the next 12 months.
• Emerging Markets: Oil prices have steadily risen, helping to pull Brazil and Russia out of recession. China is addressing its monetary policy in a favorable way, and India continues as one of the fastest-growing markets in the world. These 4 nations (and other emerging markets) are boosting the global economic outlook, though they remain fragile and volatile. Any strife in these nations could thwart growth in 2018.
What Can You Do?
How can you be prepared for 2018? While this business travel forecast should be helpful in planning your corporate travel expenditures for next year, keep in mind the following to ensure you’re protected against the unexpected.
• Create Sustainable Programs: Your business travel policies and relationships need to be sustainable. In order for you to sustain healthy relationships with vendors, it’s important that both parties feel like they’re getting something of value. Among your many options, consider the hotel approach that blends fixed and dynamic pricing — this is just the type of win-win deal that creates a sustainable relationship.
• Be Flexible: The unexpected will happen in 2018. On what scale, we can’t know. But be ready to take action as markets shift and new risks emerge. It’s important that you and your team keep tabs on the travel industry and what’s going on specifically what’s happening with your regular suppliers.
• Track the Data: It’s time to enhance the capture of data related to your company’s business travel. If you’re not already, track credit card and expense data that can help create metrics that show per-trip ROI on a traveler-by-traveler basis. This will help you better understand where your investment in business travel is going, as well as the return you’re getting on that investment.
Let JTB Help
At JTB Business Travel, we serve businesses across the country who want more from their corporate travel. We use a variety of tools and services to help your company save more and do more. Behind each of our services, tools and recommendations is a common sense approach to business travel.
Contact us today to learn more about how we can help enhance your team’s business travel in 2018.