Bertrand Saillet, managing director of FCM Travel Asia, addresses how the ebb and flow of airfares and room rates in key business cities will shape corporate budgets for the year
Is the cost of corporate travel expected to fluctuate a little or a lot in 2024?
While travel demand is growing and positive, the increases have moderated for a third quarter due to additional air seat capacity. As such, airline tickets, hotels, and car hire rates have also levelled.
We anticipate increased business travel for 2024 pending economic conditions and longer-term outcomes of the current conflicts and visa issues.
China has started easing visa entries for several nationalities, but the big unknown is between India and China – the two largest economies in the region. This has a huge impact on corporate travel.
What is the outlook for airfares?
Fuel, cost recovery, sustainability and fleet upgrades, which require investments from airlines, will continue to impact the sector and FCM Consulting has forecasted an average fare rise of between three and seven per cent in 2024.
After the pandemic, due to the lack of air seat capacity and the need to travel for face-to-face meetings, airfares skyrocketed. But this has started to level as airlines add capacity.
Popular routes in Asia, however, have seen an increase in economy class fares by 21 per cent and 17 per cent in business class fares year-to-date 2023 versus 2019.
For example, Mumbai to London has seen the highest increase of 24 per cent in economy class fares, followed by Mumbai to Delhi. Business class fares from Mumbai to London saw a 14 per cent increase in 2023 versus 2019.
Both airports from Shanghai to Singapore have also seen an increase in business class fares, where Shanghai Hongqiao International Airport saw a 24 per cent increase in fares and Shanghai Pudong International Airport saw a 20 per cent increase.
How will cost impact corporate travel policy and what changes do you foresee in programmes?
Cost is the number one priority when it comes to travel, and we do not expect that to change.
As an average indicator of the increases for goods and services, inflation forecasts can be a good way for companies to budget for the year ahead.
Economists estimate that inflation in 2024 will be five per cent (IMF July 2023 report), compared to the global average of 8.7 per cent in 2022 and an estimated 6.8 per cent in 2023.
Asia has seen key cities’ occupancy growth of between 108 and 153 per cent year-to-date in 2023 compared to 2022. Growing demand is now fuelling the rate increase this year.
Average room rates in Asia have gone up by US$33 to US$173 from 2022 versus 2023, which is why 3Q2023 saw a nominal increase of just one per cent due to the steep jump earlier in 1Q2023.
Tokyo leads with the highest average room rates of US$281 a night, followed by Seoul at US$277, Singapore at US$265 and Hong Kong at US$246. In India, Bangalore is US$143, Mumbai US$148, Delhi US$135 and Chennai US$96.Meanwhile, Hong Kong leads at US$246 a night, Beijing averages US$166 and Shanghai US$141.
Nonetheless, corporate travel programmes should budget for moderate increases.
Is corporate commitment to sustainable travel still going strong and what factors are likely to influence them to step it up?
We have been helping companies gain full visibility of their carbon emissions through our partnership with the Centre for Aviation-CAPA and Envest Global.
As part of their commitment to sustainability, we see the trend becoming a priority for businesses and we have a suite of solutions for corporate travellers to travel better.
In Europe, there are incentives that promote shorter travel via train instead of air, and airports have been forced to reduce their domestic flight capacity when rail is an alternative. There is also pressure on corporates to reduce carbon emissions and we are working with travel managers to find solutions such as choosing energy-efficient carriers.