After a series of global shocks, inflation has picked up in the past few months and everyone is affected by the current lifestyle crisis we’re going through – including businesses, forcing them to make more cautious spending choices.
What has been the effect of inflation on business travel though?
How is travel spending evolving compared to previous months and quarters?
How do they compare to pre-pandemic levels?
That’s exactly what we determined with our report on business travel inflation in 2022.
For companies to successfully deal with the rising cost of corporate travel, plan their travel expenses successfully and even save money on it, they need to know where they stand and what to expect in the near future.
Key points on how inflation has affected the business travel industry
- An after experience +50% YoY Peak in mid-2022 (year-on-year), Prices fell to +26% YoY growth Currently. The chaos that the business travel industry faced in 2022 is now stabilizing.
- After record highs in the spring and summer of 2022 (Q2/Q3), business travel inflation Declining gradually in Q4/2022with a quarterly decrease -8% QoQ (quarter-on-quarter).
- Lodging and flight prices hit record highs in 2021with a 60.2% YoY growth in the second and third quarters of 2022, respectively.
- But unlike airfare and hotel prices, Car rental prices are still rising In Q4/2022, by +5.5% QoQ.
- Corporate travel pricing is current 20% higher than pre-pandemic levels On an average (compared to the last quarter of 2019).
- Price is expected Growth continues in 2023.
Global outlook: Prices are stabilizing after record highs in the spring and summer of 2022
So, what happened to the price of business travel in 2022? In short, things were wild but now the market is slowly cooling down.
Below, you can see an overview of price movements in 2022 compared to last year. To get a more realistic picture and isolate the impact of COVID in 2020 and 2021, we have also included year-over-year inflation data compared to 2019.
As you can see, the spring and summer of 2022 were chaotic. Prices are up about 50% compared to 2021 (blue column).
After these record highs, however, business travel fares are now slowly declining and stabilizing, down about -8% QoQ (quarter-on-quarter) (orange column). Otherwise said, the chaos that the industry faced at the beginning of this year is normalizing before the end of the year.
If you look at the data for 2022 vs. 2019 (red column), things look more stable overall, but the growth is still significant, from 12.4% (in Q1) to 24.3% (in Q3). Right now, the value of corporate travel is about +20% higher than in 2019 and is expected to continue growing until 2023.
The Global Business Travel Association (GBTA) expects global business travel spending to reach pre-pandemic levels and fully recover by 2026.
Zoom in: Business travel prices by spending type
Let’s now look at how business travel pricing is evolving vertically and look at air travel, hotel, train and car rental costs.
Overall, prices are stabilizing across all verticals except car rental, which sees +5.5 QoQ growth in the last quarter of 2022. Other prices are recovering from the start of this year, with flight prices falling by -7% QoQ, hotels by -3% QoQ and train travel by -2% QoQ. Compared to pre-Covid levels, however, these higher prices are not expected to abate.
In the table below, you can see the details of the price per category, which we will analyze in the next few sections:
Airfare and train fares
Globally, airfare prices exploded in the second and third quarters of 2022 (3rd quarter prices were 60% higher than 2021 prices) and have yet to recover.
Right now, there is inflation for business air travel +34% compared to pre-COVID levels (i.e. last quarter of 2019), with car rentals making it one of the most significant growths.
Train prices also increased in the spring and summer of 2022, but to a much more modest level: they were 18% higher in the third quarter of the year than in 2021, but were actually lower than pre-pandemic levels throughout. year (from -27.2% in the first quarter to -5.7% in the last quarter).
In addition, with sustainability an increasingly important consideration for businesses, a large number of companies are beginning to purchase sustainable aviation fuel (SAF) in bulk, which is increasingly available in the market, Reuters reports. SAF is more expensive than conventional fuels, however, which may also affect costs in later years.
Of all the categories, train prices have been the most stable, which means that for European companies, it may make sense to rely more on train travel for business travel today, or at least compare costs with a business travel management platform. Like TravelPerk.
Globally, hotel daily rates reached their highest levels in April and May 2022, reaching +60% YoY over last year. Compared to pre-pandemic levels, Housing inflation +17%That is, airfares are significantly lower than inflation.
What is the possible explanation for this disparity between hotel prices and airfares? Perhaps, fuel costs, which increase the cost of air travel.
Car rental prices have remained relatively stable in 2022 compared to 2021 and quarter to quarter, but have continued to rise compared to pre-Covid levels and are currently 68% higher than in the last quarter of 2019.
Across all verticals (airfare, accommodation, train and car rental), this is the most significant increase.
Business travel inflation by location
Now let’s zoom in further, to see how the value of business travel is evolving in different locations.
Europe vs US Airfare
In Europe, flight price recovery has been slow, only in the last quarter of 2022, with a decrease of -11% QoQ.
Why? Rising fuel costs in Europe as a result of the war in Ukraine and ongoing energy unrest on the continent are a major factor behind Europe’s high air fare inflation.
European airfares hit record levels in Q3 (and July 2022), with YoY inflation ranging from +96% for the UK to +45% for Germany, +64% and +48% in Spain and France respectively.
In the final quarter of the year, price declines were driven to a large extent by Spain (-15% QoQ) and the UK (-12%), France (-9%) and Germany (-8%).
Airfare inflation in Europe currently sits at 30%, compared to pre-pandemic levels. In Germany, this number is 46% (compared to the last quarter of 2019), which is also the highest of the four we are comparing: in the UK, we are +36%, in France +23%, and in Spain +18%.
On the other hand, US prices, already starting to recover since July, decreased by -8% in Q3 and are currently stable in Q4 (0% increase).
US travel prices peaked in the second quarter of the year with +81% YoY growth over 2021 and then began to stabilize, making domestic travel spending somewhat more predictable for companies.
Why? Fuel became cheaper in the US in the second half of 2022 than in Europe, following overall Consumer Price Index (CPI) trends. Europe’s energy industry and supply chains appear to be much more affected than in the US, which inevitably affects air travel as well.
In the US, business airfares are even 10% cheaper than pre-pandemic levels, following a different trajectory than in Europe.
Accommodation in Europe and USA
Lodging has also increased compared to pre-Covid levels: a night in a hotel is 12% more expensive worldwide than in the last quarter of 2019.
In the last quarter of 2022, there was a slight increase in hotel rents in the US (-7%) compared to the previous quarter (2%), compared to a slightly more significant decrease in Europe.
In Europe, hotel rates are currently stable. This trend is driven by Spain (-10% QoQ), Germany (-6.5%) and France (-3%), which were up more than 50% YoY in May 2022.
Compared to pre-pandemic levels, average hotel costs for business travel are +11% higher, with the highest inflation in France (+25%), Germany (+6%) and Spain (+5%) with much lower growth.
In the UK, prices have currently stabilized at pre-Covid levels, only 0.7% higher than in the last quarter of 2019, with a YoY peak (+58%) in the second quarter of 2022.
What about traveling to the US, though?
In the US, the most significant peak was in the spring of 2022, with YoY growth of +72%, and prices continued to rise in the second half of the year. A night in a hotel is 13% more expensive than at the end of 2019.
What to expect in 2023 and how to best manage business travel expenses
Inflation has risen in the last few months due to the global pandemic and rising fuel prices as a result of the war in Ukraine. So, what should we expect in 2023 – and what’s the best way to manage rising business costs and adapt your travel plans?
Companies can expect these prices to continue to rise in 2023, according to CWT and the Global Business Travel Association (GBTA). Rising fuel costs are an important factor driving up prices, especially for air travel, in addition to overall increases in labor shortages and living costs, making companies particularly wary of travel costs.
With a universal travel platform like TravelPerk, however, managing corporate travel becomes much easier. With it, employees and business travel managers can compare offers in one place and benefit from the world’s largest travel catalog, with more options and at better prices than anyone else, making business travel more affordable and easier to manage.