Business Travelers Could Benefit from Pricing Wars

According to a new report business travelers could wind up benefiting from a potential price war between airlines flying from Europe to Asia.


BCD Travel’s research arm, Advito, made the prediction as part of its 2014 Industry Forecast which looks at the likely price changes for major travel components including flights, hotels, rail, car rental and meetings.


Due to weak demand in the region, the report expects that airlines in Europe will not be able to introduce “steep fare increases”.


Advito also states that “excessive capacity from Gulf carriers could work to buyers’ advantage” to create the proper conditions for an ongoing price war on flights from Europe to the Middle East and beyond.


“Since European carriers lack the financial resources of their Gulf competitors, they will have to make some tough decisions over flight or fight. For example, Lufthansa has already scaled back services to India in response to intense competition from the Gulf carriers and Turkish Airlines”, the report stated.


Advito is predicting that the overall European intercontinental economy and business airfares will rise by 2 percent and 1 percent respectively in 2014. However, European short-haul airfares in both classes are planned to increase by 1 percent.


“Full-service European airlines show little interest in increasing capacity, aside from the introduction of Airbus A380s on some long-haul routes,” stated the report.


“Low-cost carriers and hybrid airlines, on the other hand, will continue to expand. We expect that this expansion will restrain short-haul fare increases within Europe, and anticipate rises of not more than 1 percent.”


The report also forecasts “moderate increases” in average hotel rates across most major markets including a 1-3 percent rise in the UK next year.


“Demand will continue to increase in most markets, although not as dramatically as hotel companies might anticipate. Latin America and Africa look set for the strongest rates of demand growth,” claimed Advito.


“Hotel companies are seeking negotiated rate rises of 4 to 6 percent for 2014. One or two are being more aggressive, but generally they have set a much lower target than the 9 percent growth they had anticipated in 2013.”


“Given the uncertainty about demand recovery levels, we think hotels are still being overly ambitious.”


Advito added that it expected hotels to only be able to raise corporate rates by an average of 2 to 3 percent for 2014.