But the pace is subsiding as capacity grows across all travel segments, from airlines to hotels and car rental companies
NEW YORK (February 12, 2024) – While airline, hotel and car rental rates are stabilizing, business travelers can expect to pay more to go on the road this year, according to the 2024 ALTOUR Industry Forecast. ALTOUR is one of the world’s largest travel management companies.
The torrid rate increases that business travelers experienced in 2022 and 2023 are expected to subside this year. Leisure travel is returning to pre-pandemic levels and the growth in capacity across all travel segments is beginning to meet or, in some cases, exceed demand forecasts.
Still, even with some degree of rate stabilization, the cost of taking a typical business trip will range from 9 percent to 14 percent higher in 2024 compared with 2019, before the pandemic, according to the ALTOUR forecast.
“With prices increasing, there are many factors for companies to consider when booking flights, hotel stays and car rentals,” said Gabe Rizzi, President, ALTOUR. “That’s where the expertise of a travel management company like ALTOUR is invaluable. We know what’s happening in each sector of the business travel market and can assist your company in finding the best options within your budget, taking into account duty of care obligations and a commitment to sustainability.”
When it comes to airlines, there are already signs that capacity and demand are equalling out, which should lead to a small increase in airfares, or even a decline in some parts of the world.
Domestic airfares are projected to rise from 2 percent to 4 percent on a year-over-year basis. Major U.S. carriers have continued to fortify their domestic hubs, improving the overall strength of their networks. In hub-related markets, fares could increase by more than 4 percent simply due to a carrier’s dominance.
Looking globally, some airfares could decrease on a year-over-year basis, driven by the decline in ticket prices in the Asia-Pacific region from 2023, when there was strong demand and limited flight capacity.
In key driver markets, such as the United States to Europe and Latin/South America, airfares are expected to increase in the range of 2 percent to 5 percent year over year.
For businesses that renegotiated airline corporate sales agreements in 2023, the major takeaway was a reduction in discount offerings, particularly in domestic travel that touched airline hubs, and limited, if any, negotiating ability. The only area of leverage is with premium cabin international travel in competitive markets, which is highly coveted by airlines and comes with better discounts in return for increased market share. In some cases, this can be used to leverage better discounts for domestic travel.
The average daily hotel rate is projected to increase from 2 percent to 5 percent on a year-over-year basis, a much slower pace than in 2022 and 2023. Still, the average daily rate in the United States will be 21.3 percent higher than it was in 2019. For the 2024 rate season, ALTOUR’s hotel consulting team is reporting an aggregate 2 percent year-over-year average daily rate increase across its customer base.
It’s important to note that there will be large fluctuations in rate changes depending on the city and type of hotel. For example, rates in cities like New York, London, Chicago, Los Angeles and Paris will see a year-over-year increase that’s higher than the general rate forecast. These locations have a combination of business, meetings/events and leisure travel components that drive hotel rate increases. This is particularly the case with upper hotel tiers and “big box” properties.
Conversely, for lower-tier, limited-service properties, rate increases will be limited, because factors that drove this segment’s full return to pre-pandemic levels in 2022 are changing. The substantial increase in leisure or “revenge” travel is subsiding. As a result, this hotel segment will become more dependent on business travel in order to meet 2024 revenue projections. In fact, ALTOUR’s hotel consulting team negotiated static rates with some hotels in this tier for 2024 that are 10 percent or lower compared with rates in 2023.
For business travelers who need to rent a car, the outlook is mixed.
As supply-chain issues have subsided, the vehicle inventory has vastly improved. Still, travelers can expect to pay 3 percent to 4 percent more in daily rental rates for 2024 on a year-over-year basis. Higher labor costs, the cost of acquiring vehicles and inflationary pressures will drive the rate increase.
Car rental companies are continuing to expand their electric vehicle offerings, which will help business travelers comply with their corporate sustainability initiatives. But EVs are 25 percent to 35 percent more expensive to rent than their gas-powered counterparts. This is certainly a consideration when balancing sustainability and budgets.
For ALTOUR’s business travel consulting group, the philosophy related to rental car contracts is to focus not just on the rate per car type, but on other factors that can increase the average daily rate. These can include city surcharges, weekday rental surcharges, vehicle licensing fees and energy recovery charges, among other costs.
ALTOUR’s business travel forecast was compiled with information from multiple industry sources, including the International Air Transport Association, Global Business Travel Association, Business Travel News, STR, CBRE and Car Rental News, as well as insights from ALTOUR’s internal data and consulting divisions.
Internova Travel Group, one of the world’s largest travel services companies, recently announced that Travel Leaders Corporate and ALTOUR’s business travel division will integrate under the ALTOUR brand. For more information on industry forecasts, preferred travel vendor negotiation and strategy, please contact Eddie Albertson, Senior Director of Business Travel Consulting for ALTOUR, at email@example.com.
ALTOUR is one of the largest travel management companies in the United States and around the world serving the corporate and leisure luxury and mid-markets and entertainment community. ALTOUR is part of Internova Travel Group, which is the highest-ranking American corporate travel management company, according to Business Travel News.