American Express Global Business Travel predicts increases in air, hotel and ground prices for Canada in 2015

The American Express Global Business Travel Forecast 2015 (the “Forecast”), predicts air, hotel and ground transportation prices to be neutral to slightly higher across all regions in 2015. At a country-by-country level, airline consolidations, stricter corporate travel policies and limited hotel supply are changing supply and demand dynamics and are also expected to impact pricing next year.

In North America, an improving economy in the United States will likely cause price increases across all categories. Canadian air and hotel suppliers are expected to benefit from this improvement, as well as a stable domestic economy. Increased business travel combined with weak competition in the airline industry and nominal room supply growth in major cities including Toronto, Vancouver and Montreal will make price increases in 2015 likely.

“Canada’s economy is expected to remain stable or grow in 2015, increasing business travel across the country and abroad. The reality of supply and demand along with a focus on yield management will benefit Canada’s air and hotel suppliers who will likely increase pricing. This will place even greater emphasis on companies and travel managers to find ways of evolving their travel programs to improve the returns on their travel expenditures” says Colin Temple, Vice President and General Manager at American Express Global Business Travel, Canada.

North America predictions and dynamics

In North America, business travellers can expect price increases across travel categories in 2015. With an improving economy and greater corporate confidence, capacity discipline by US carriers, and the recent consolidation of the domestic market, airlines are predicted to raise their long- and short-haul fares in the coming year. Inventory controls are likely to improve yields for airlines, leading to fewer seats in lower fare classes on busier routes. In Canada, the Forecast predicts prices to rise as the country continues to benefit from the improving US economy. Additionally, North American companies continue to redefine their cabin eligibility policies, which may create greater opportunities for Asian and European carriers who offer distinctive “premium economy” classes for companies looking to book cheaper seating options with minimal traveller resistance.

In 2015, North American hotel rates are expected to trend upwards, buoyed by favorable economic growth, increasing demand, and a lack of new inventory. After an extended period of relative weakness, hotels are looking to capitalize on favorable market dynamics to increase profitability. As the economy picks up and business demand grows, price increases are anticipated across the region; however, the degree of these increases will vary significantly city-to-city. In this environment, moderate and upscale hotels continue to explore ways to further differentiate themselves from the competition. Mid-range hotels are renovating their sites to improve their offerings and deliver greater value to business travellers through business-friendly services and by creating modern and clean interiors, thus allowing them to compete with higher-end hotels. In turn, higher-end properties are placing an increased focus on delivering superior levels of customer service to ensure traveller satisfaction.

Consolidation, fleet management, and pricing dynamics continue to shape the North American ground transportation market. Recent industry consolidation has posed several challenges for the three key industry players, with some facing excess inventory issues due to a large number of retail vehicles that were acquired during mergers. Base rates and average daily rates are predicted to increase slightly as car rental companies raise prices to remain profitable and continue to push ancillary fees; however, corporate buyers are expected to continue to push back and negotiate their rates, making it likely that rental companies will work with their customers to keep their corporate rates generally flat next year.

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