Business travel hot spots – or not?

While business travel worldwide continues to show a steady recovery from the dark days of the great Recession, some countries are emerging as “hot spots” where prices will increase more than in others.

That’s the conclusion from the new 2016 Global Business Travel Price Outlook issued by the Global Business Travel Association Foundation and Carlson Wagonlit Travel.

It said that air travel costs will remain mostly flat next year — increases of one percent or less — except in six nations where it sees “increased business travel demand…driving significant air price increases.” Those countries are India, China, Colombia, Mexico, Singapore and Australia, where air fares are expected to grow by 2.6 to 3 percent, the study said.

The researchers said the same is not true of hotel rates, which are likely to show significant increases worldwide “because demand is overtaking supply in every major global region.” The study predicts hotel price increases of 4.3 percent in North America next year, driven by heightened business activity in the Bay Area, Los Angeles and other major cities.

Hotel rates are likely to grow by 3.7 percent in Latin America and 3 percent in Asia Pacific nations, but only 1.8 percent in Europe, the Middle East and Africa, GBTA said.

The full report is available free through the GBTA website.

GBTA also suggested on its blog that in looking at the U.S. data, the highest projected hotel price increases for 2016 appear to be in cities where the “tech and entertainment industries” are dominant — e.g. 12 percent in San Jose, 8.8 percent in San Francisco, 7.8 percent in Los Angeles — while cities with a wider or more traditional business base will see hotel rates “barely keeping pace with inflation” — such as a projected 1.0 percent increase in New York and 2.0 percent in Washington.

That may be, but in considering only the demand side of the equation, GBTA is neglecting the other big driver of price changes: Room supply. The number of available hotel rooms is notoriously tight in San Francisco, which has seen prices spike in the past couple of years; and it has expanded considerably in New York in recent years with a large number of hotel openings.

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