Global hotel rates could rise by 4 times inflation in 2022: new report

Skift take

Businesses shouldn’t underestimate the ripple effect of this year’s labor crisis, and this new report is a timely warning to help them manage costs better next year.

Matthew Parsons

Businesses are expected to brace themselves for much higher hotel rates next year, as the labor crisis and other macroeconomic factors roll into 2022.

A new report has warned that prices will rise 13% in 2022, far exceeding inflation.

The International Monetary Fund predicts that advanced economies will experience inflation of around 2% by mid-2022, while the Organization for Economic Co-operation and Development expects G20 countries to experience an inflation rate of 3.5% by the end of 2022.

However, the warning – which appears in the Global Business Travel Forecast, published on Wednesday – indicates a drop in air fares and ground transportation costs, to 3.3% and 3.9% respectively.

Supply constraints

The accommodation industry is expected to be affected by several factors, including the availability of the workforce, according to the report. Its publication comes just weeks after CEOs of the world’s largest hotel groups said it was an issue that won’t go away anytime soon.

And with the return of business travel, occupancy rates will continue to rise for high-end properties. “Upscale hotels are expected to experience higher occupancy rates and rates as business travel, corporate meetings and events will also impact hotel prices,” said Richard Johnson, director leader of the solutions group of travel agency CWT, which released the report alongside the World Business Travel Association.

Supply chain issues, rising operational costs and staff shortages are also plaguing the meetings industry, according to a survey by the UK Meetings Industry Association.

“90% of sites reported an increase in operating costs, and more than half reported ‘substantial increases’. This includes increases of up to 10 percent in the costs of food and beverage, energy, salaries and recruiting, with most predicting further increases in the next quarter, ”the association said.

The only way is to go up

Businesses shouldn’t be too shocked by the anti-inflationary price hikes, as the report points out that after hotel rates hiked 3.5% in 2019, they fell over the next two years, dropping by 8.3% in 2020 and 17.7% in 2021.

However, after the 13% increase in 2022, they are only expected to increase by 10% in 2023.

Air fares, meanwhile, have their own catching up to do. They are expected to increase by 3.3% in 2022 and 3.4% in 2023. During the pandemic, the average price of tickets fell by 3.1% (in 2020), while business class seats fell by 31% and the premium class plunged 38%. In 2021, economy class tickets fell only 19%.

Car rental prices around the world fell 2% in 2020 and rebounded 1.2% in 2021. Prices are expected to rise 3.9% in 2022 and an additional 3.0% in 2023, although that this can be slowed down by the shift of business travelers to greener modes of travel, such as trains.

What Can Travel Buyers Do?

According to CWT’s Johnson, the reason for the report, released to coincide with the Global Business Travel Association’s convention, is to give travel buyers the right information to think about how they govern their travel program or policy.

For example, if there is a shortage of supplies around the corner, it gives them the opportunity to look for alternatives. Additionally, companies may be less price sensitive if they buy something that matches the sustainability goals of the organization at large.

“Travel managers also need to understand who is traveling with the company now, versus who needs to travel in the future,” Johnson said. “Maybe travel less, but longer, or at different times. They should think of the total cost of the trip, rather than just one component of it. Also think about the travel class and work with the suppliers. They don’t have to wait for the RFP process.

The Global Business Travel Forecast uses anonymized data generated by CWT and the association, with publicly available industry information and econometric and statistical modeling developed by the Avrio Institute.

“As we move towards the recovery, information and data will be essential to enable the business travel industry to navigate what is likely to be a dynamic year ahead,” said Suzanne Neufang, CEO of Global Business Travel Association.

“This forecast is designed to help business travel buyers build and budget for their 2022 travel plans with an insightful summary of how the global pandemic has influenced prices in 2021, as well as a detailed look at macroeconomic factors that will affect prices in 2022, “she added.

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