A strong global economy and rising oil prices are expected to push up the cost of air travel in 2019.
Singapore: A strong global economy and rising oil prices are expected to push up the cost of air travel in 2019, with fares seen rising 2.6 per cent and hotel rates up 3.7 per cent, although there are downside risks from a trade war, according to an industry forecast.
In some countries, including India, New Zealand, Norway, Germany and Chile, airfares are expected to rise by more than 7 per cent, said the annual business travel forecast from Carlson Wagonlit Travel (CWT) and the Global Business Travel Association (GBTA) released on Tuesday.
“Speaking for the Asia-Pacific region, we are coming off a period three to four years ago where there was a lot of capacity in the system (and) fares were down pretty significantly, potentially lower than was sustainable,” said Michael Valkevich, CWT’s vice president for global sales & program management, Asia Pacific.
“So I think we are getting to a bit more of a renormalization of sustainable fares.”
The International Air Transport Association in June forecast passenger yields, a proxy for airfares, would rise by 3.2 per cent this year in the first increase since 2011 as a stronger global economy drives growth in demand. CWT/GBTA predicted a 3.5 per cent rise in airfares in 2018 in a forecast released last year.
Airline costs, including for fuel and labor, have been rising, leading carriers to attempt to push up fares or add fuel surcharges to maintain margins.
The CWT/GBTA 2019 forecast said the rise in hotel rates would be driven by an increased demand for air travel, which would fuel demand for rooms. Room rates are expected to rise by more than 5 per cent in Asia and Europe, by 2.1 per cent in North America and to fall by 1.3 per cent in Latin America.
Hotel groups including France’s Accor SA and US-based Marriott International Inc have reported strong growth in revenue per available room in Asia and Europe this year.
The CWT/GBTA forecast said despite its positive outlook, risks remained for the global economy in 2019 from the rise of protectionist policies, the stoking of trade wars and uncertainty over Britain’s exit from the European Union.
Valkevich said the US-China trade war had not yet led to any noticeable drop in demand for business travel, but it was a “downside risk factor” for the corporate travel industry.