Skift Take
Business shouldn’t undervalue the ripple effect of this year’s labor crisis, and this new report is a prompt heads-up to assist them much better handle their costs next year.
Matthew Parsons
Companies need to prepare for much greater hotel rates next year, as the labor crisis and other macroeconomic factors unfold into 2022.
A new report has cautioned that prices will rise by 13 percent in 2022, considerably outgunning inflation.
The International Monetary Fund forecasts advanced economies will see inflation of about 2 percent by mid-2022, while the Organisation for Economic Co-operation and Development anticipates the G20 nations to have a rate of 3.5 percent by the end of 2022.
Nevertheless, the caution– which appears in the yearly Global Service Travel Projection, released on Wednesday– indicate lower upticks in air fares and ground transportation expenses, at 3.3 percent and 3.9 percent respectively.
Supply Restrictions
The lodging sector is set to be struck by numerous factors, consisting of the availability of labor, the report says. Its publication comes just weeks after CEOs of the world’s largest hotel groups said this is an issue that isn’t disappearing anytime soon.
And as company travel returns, occupancy rates will increase even more for top-end properties. “High end hotels must see greater occupancy levels, and higher room rates, as business travel, and corporate conferences and occasions, will also affect hotel rates,” said Richard Johnson, senior director, solutions group at travel bureau CWT, which published the report together with the Global Company Travel Association.
Supply chain problems, increased functional expenses and staff shortages are also striking the conferences sector, according to a survey by the UK’s Meetings Market Association.
“Ninety percent of locations have actually reported increased operational expenses, with over half highlighting ‘substantial boosts.’ This consists of increases as high as 10 percent in food and drink, energy, income, and recruitment expenses, with the majority of forecasting additional boosts over the next quarter,” the association stated.
The Only Way Is Up
Business should not be too surprised by the inflation-busting price hikes, as the report mentions that after hotel rates increased by 3.5 percent in 2019, they plummeted over the next 2 years, falling 8.3 percent in 2020 and 17.7 percent in 2021.
Nevertheless, after the 13 percent boost in 2022, they are expected to go up by simply 10 percent in 2023.
Air fares, on the other hand, have their own catching up to do. They’re set to rise 3.3 percent in 2022, and 3.4 percent in 2023. Throughout the pandemic the average ticket cost fell 3.1 percent (in 2020) while business-class seats dropped 31 percent, and premium class nose-dived 38 percent. In 2021, economy-class tickets decreased just 19 percent.
International automobile rental costs fell 2 percent in 2020 and recuperated 1.2 percent in 2021. Prices is anticipated to increase 3.9 percent in 2022, and an additional 3.0 percent in 2023, although this may be moistened by business tourists changing to greener modes of travel, such as trains.
What Can Travel Buyers Do?
According to CWT’s Johnson, the reason for the report, published to coincide with the Global Service Travel Association Convention, is to provide travel buyers the right information to assess how they govern their program or travel policy.
For instance, if there’s a shortage of supply around the corner, it provides a possibility to take a look at alternatives. Additionally, business may be less price sensitive if they’re purchasing something that lines up with the larger organization’s sustainability goals.
“Travel supervisors likewise require to comprehend who is presently traveling with the business, versus who needs to take a trip in the future,” Johnson said. “Maybe travel less, however for longer, or at different times. They require to think about total cost of journey, instead of about one single component of it. Likewise think of the class of travel, and deal with providers. They don’t have to wait until the request for proposition process.”
The Global Business Travel Projection utilizes anonymized information created by CWT and the association, with openly available market details, and econometric and statistical modelling established by the Avrio Institute.
“As we turn towards recovery, insights and information will be vital to make it possible for the business travel market to navigate what will likely be a dynamic year ahead,” stated Suzanne Neufang, CEO of the Global Service Travel Association.
“This projection is developed to assist corporate travel purchasers develop and budget plan their 2022 travel programs through an informed summary of how the international pandemic affected rates in 2021, along with an in-depth take a look at macroeconomic aspects that will impact prices in 2022,” she included.