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November 2012

12th Annual Meetings Industry Forecast

By Michelle Russell

On Our Radar for 2013

Travel

Global Travel Prices for 2013

Findings from Carlson Wagonlit Travel (CWT) 2013 Travel Price Forecast report include:

Prices in most areas of travel spend are expected to grow modestly around the globe next year, with the most significant inflation expected throughout the Asia Pacific and Latin America regions. “Price increases in 2013,” said Senior Vice President of Global Product Marketing and CWT Solutions Group Nick Vournakis, “will begin to level off in most regions throughout the world compared to what travel buyers experienced in 2012, as booming economies like Asia Pacific’s begin to normalize, and as uncertainty remains in Europe. While slightly higher prices will be the reality again next year as demand for travel outpaces supply in most places, our forecast demonstrates there is still plenty travel buyers can do to watch costs and take care of travelers through other measures, including re-examining how they influence traveler behavior.”

Airfares will likely climb 2.5 percent during 2013, as carriers have been diligent in implementing tight capacity controls that continue to yield high load factors despite economic concerns.

High-speed rail rates will likely increase 4.3 percent during 2013 as this mode of transportation continues to offer a competitive alternative to air travel in key markets. Notably, increases of up to 9 percent are expected in premium-class cabins, where corporate travelers typically ride to access free wireless Internet and other amenities.

The Asia Pacific region has experienced strong economic growth over the past several years, which quickly drove prices upward. Growth in 2013 is expected to stabilize, which likely will lead to modest price increases, although specific results vary widely by country.

The Latin America region continues to experience overall economic growth, though significant disparities continue to exist that will create varied travel pricing by country next year. The newly formed LATAM Airlines, which is now the world’s second-largest airline by market value, will embark on its first full year of operation in 2013, which may result in improved routes and frequencies to, from, and within the region. › While the economies of the United States and Canada are experiencing slow and steady improvement , there is no major growth expected for the foreseeable future, which will help contain travel price increases in 2013 for most categories of spend.

SOURCE: Carlson Wagonlit Travel, carlsonwagonlit.com

Global Travel Prices to Rise in 2013
Airfares - 2.5%
High-speed rail rates - 4.3%
Premium class - 9%
Moderate travel price increases should be modest in North America and Around the globe in 2013.

On the Horizon ‘A Sea Change’

“I don’t think people realize what’s coming,” Michael Boyd, president of the airline forecaster Boyd Group International, told New York Times On the Road columnist Joe Sharkey earlier this year. (Read the full column at convn.org/nyt-airlines.) “Airlines are going to do okay, but doing okay means they’re going to be dropping a lot of places they now fly. Air travel is going to get accessed by fewer and fewer people,” as airlines continue to reduce service to many markets to cut costs. “This is a mixed metaphor,” Boyd said, “but it’s going to be a sea change in air-travel patterns.”

As Sharkey went on to explain in his column, for more than a year, “most airlines have been reducing capacity in the domestic air travel system while concentrating on the major routes that provide the most revenue and feed their international routes.” Sharkey cited industry trade group Airlines for America stats: Domestic airlines earned $390 million last year, and $2.7 billion in 2010, after a decade in which they collectively lost $53 billion. The trade group, Sharkey wrote, “has been calling on the federal government for help to reduce aviation taxes and regulations, assist the industry in facing more aggressive global competition, curb fuel prices and volatility, and spend more money on improving the national air traffic control system. ... And argued that without help, ‘domestic service levels will suffer,’ especially at smaller cities and rural communities.”

Airline Performance

  • On-time arrivals — From 2007 to the first half of 2012, the on-time arriv-als rate improved by 14 percent, from 73.4 to 83.7 percent of domestic flights within 15 seconds of scheduled arrival time. 
  • Mishandled bags — The incidence of mishandled bags has dropped by 58 percent, from seven to three instances per 1,000 domestic passengers. 
  • Flight cancellations — The number of flight cancellations has decreased by 50 percent, from 2 percent to 1 percent of scheduled domestic departures. › Revenues — Per enplaned passenger, 2011 revenues exceeded costs by just 77 cents. Excluding $8.06 in ancillary fees, revenues would have lagged costs by $7.29. 
  • Air-service cuts — Due to rising costs and constraints on revenue production, domestically, the United States has a smaller industry than five years ago. Scheduled domestic U.S. air service in the fourth quarter of 2012 vs. the fourth quarter of 2007: 15.6 percent fewer flights, 12.4 percent fewer seats.
  • On-Time Arrivals +14% Improvement
  • 83.7% On-time arrival rate
  • 58% drop in mishandled bags
  • 50% drop in flight cancellations
  • Air-Service Cuts: -15.6% flights
  • Air-Service Cuts: -12.4% seats
SOURCE: Airlines for America, airlines.org

Travel as Economic Driver

  • 1 in 7 - The ratio of projected growth of travel jobs (3.3 million) to total U.S. job growth by 2020
  • $813 billion - Direct traveler spending in the U.S in 2011
  • 7.5 million - Travelers supports 7.5 million American jobs - 7% of the country's total private-sector employment (in transportation, hotels, restaurants, retail, entertainment, and many other sectors).
  • #6 - Travel ranks sixth in total U.S. employment; only five of the 20 major industries employ more people than travel.
SOURCE: U.S. Travel Association poweroftravel.org

Ancillary Fees

According to a study released this summer by airline consultant IdeaWorks and sponsored by travel technology company Amadeus:

  • United Airlines made nearly $5.2 billion from ancillary fees last year, topping the study’s global list. United’s ancillary fees — which cover penalties for items such as baggage, food, and boarding times — brought in more than double the $2.5 billion that Delta, next on the list, collected. 
  • In total, $22.6 billion was collected by the 50 airlines analyzed in the study — an increase of more than $1 billion from 2010 and a 66-percent jump in two years.
SOURCE: IdeaWorks, ideaworkscompany.com

Up Next


Runway status lights - The FAA is testing a new, automatic runway lighting system at Los Angeles International Airport and a handful of other airports, designed to help reduce and prevent runway incursions and accidents. According to a New York Times article, since 2008, there have been about three incidents a day in which a plane or vehicle gets on an active runway by mistake — an average of 1,000 a year. convn.org/runway-status

Continued scrutiny Two U.S. passenger advocacy groups — the Business Travel Coalition (BTC) and the Consumer Travel Alliance (CTA) — continue to push for the DOT’s (Department of Transportation) vigilance regarding potentially deceptive online pricing. BTC Chairman Kevin Mitchell said: “… there must be a system that empowers consumers to compare and purchase all airfare offerings and ancillary fees across multiple airlines. We must guard against unfair policies and practices that short-circuit the free market and deceive both business and leisure travelers by showing the traveler only those offerings an airline wants the passenger to see.” convn.org/BTC-pricing

Airports as public event spaces? A terminal at Dusseldorf airport turns into a public event space one day each month as part of an “Airxperience Sunday” series, free for passengers and visitors. Last month’s fashion focus included fashion shows, makeover desks, and presentations and consultations by major fashion labels across the check-in areas. fly2dus.com

More Resources
For an online graphic chart comparing 12 major domestic airlines’ baggage fees, go to convn.org/bag-fees. An interactive graphic illustrating the future of baggage handling from Condé Nast Traveler can be found at convn.org/bag-carousel.

Lodging

Demand and Average Daily Rate Increases

  • Committed occupancy for the remainder of 2012 is up 5.4 percent, and average daily rate (ADR) is up 5 percent. Growth is driven by individual business and leisure travelers, with an occupancy increase of 5.6 percent and an ADR increase of 5.5 percent in comparison to the same time last year. 

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