Business travel outlook subdued amid global economic uncertainty

Business travel outlook subdued amid global economic uncertainty

The outlook for global business travel in 2017 looks to be as subdued as this year, with only flat to moderate rate increases expected across air, hotel and ground transportation.

The projection comes against a backdrop of a continued slowdown of the Chinese economy and depressed oil prices, the UK’s impending exit from the European Union, growing populist politics and increased security concerns.

These factors have together created a higher level of uncertainty in the global marketplace.

It remains to be seen how this will impact business travel over the next year, according to the 2017 global business travel forecast by American Express Global Business Travel.

While demand for air travel remains at a record high, persistently low fuel prices and strong competition will help keep air fares in check, the study predicts.

Hotel performance will improve moderately and prices will remain flat in most regions with the exception of Latin America, where rates will decline slightly, and Asia Pacific, where the impact varies greatly by country.

Ground transportation has felt the impact of new industry players and rates should remain flat as capacity continues to exceed demand.

Airlines in Europe continue to face significant headwinds in the form of lacklustre economic performance, security concerns, long haul pressure from Gulf carriers and the growing presence of budget airlines on short haul routes.

With low-cost carriers looking to continue their aggressive expansion in 2017, fares will stay level with 2016.

Currency devaluation following the Brexit vote has had the short-term effect of making outbound travel from the UK more expensive.

However, the medium to long term impact of Brexit on business travel will not be known until the UK government starts negotiations with the EU, which are expected to begin in thr second quarter of next year.

Political and economic uncertainties in Europe are flattening hotel demand but the overall lack of new supply should help sustain mild rate increases.

Despite speculation that the UK would see prices rise on higher demand from value-seeking tourists and domestic holidaymakers forced to stay at home, rates are staying level and should remain so through 2017.

In European countries where demand growth is strong, such as in Ireland or Russia, price increases should be similarly robust.

By contrast, the strong demand experienced in Dubai and Abu Dhabi should result in only minimal price increases given the significant amount of new construction in those cities.

Travellers renting cars in Europe are increasingly looking for options with a lower environmental impact, such as hybrid and electric vehicles.

While suppliers are prepared to increase their fleets, they will only do so once the infrastructure to support it becomes available.

Rates should rise only marginally across all regions in Europe as economic growth is tempered by strong competition among car rental companies looking to expand their regional footprints.

Amex GBT vice president and head of global business consulting Rodolfo Elizondo believes that companies and business leaders will welcome news that the cost of business travel may, at worst, endure only modest increases in a period of political and economic uncertainty,

“Travel managers should focus on the things they can control, like demand management, compliance and traveller satisfaction to reduce risk and increase savings,” he said.

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