Increased demand for travel in 2012 will mean higher prices for transportation It’s that time of year again, when travel pundits and prognosticators do their best to predict what may or may not happen in the coming year. Here’s what I see on the horizon for frequent travellers in 2012. Apart from uncertainty about the eurozone, the global economy is slowly improving, meaning individuals and companies are likely to increase their budgets for both business and leisure travel. But just like improvements in the global economy, any expansion in travel budgets is going to be very slow.
Increased demand for travel in 2012 will mean higher prices for transportation, fuel, lodging and food, with the biggest jumps in fast-growing regions such as Asia, India and South America. Business travel to and from Japan should continue to improve, but leisure travel to this country will stay slow -- forcing down rates for what has long been one of the most expensive countries in the world.
With Europe’s economic woes, demand and prices for travel in the region could flatten, but this will not be by much. European companies are likely to crack down on extravagant spending by cutting back or eliminating business class air travel, enforcing the use of midrange hotels and asking travellers take trips by car or train instead of flying. In the unlikely event Greece reverts back to the drachma, prices could take a tumble there, opening up opportunities for bargain-focussed vacationers.
In the US, hotel prices will continue to increase in big coastal cities such as New York, Boston, Washington DC, Los Angeles and San Francisco where business is brisk, but will remain mostly flat in the heartland where economic recovery is slower. Airfares in the US are currently 10 to 20% higher than two years ago, and look to remain high as airlines continue to reduce capacity, consolidate, or, like bankrupt American Airlines, shrink their way to profitability.
Here’s a round up of what to expect regarding…
Airfares
The price of oil has decreased to around $100 per barrel (down from a high of about $120 this past April), which is helping keep a lid on any major airfare hikes. Intra-European airfares could decline slightly if economic malaise results in less demand. In the US, airfares are high now, and will continue to inch up as airlines continue to reduce capacity. In India, the new breed of low-fare carriers discounted too much too soon, which means they will probably have to increase fares in order to survive. Despite the emergence of more Asian low-cost carriers, intra-Asian fares will continue to rise, along with demand for air travel to, from and throughout the region. In 2012, China’s Beijing Capital International is expected to surpass Atlanta’s Hartsfield-Jackson International in the US as the world’s busiest airport.
Hotel rates
The world is experiencing a hotel building boom, and that steady stream of new rooms should keep a lid on any dramatic price increases. After years of price spikes, hotel rates in overbuilt Shanghai are moderating, and there’s a similar phenomenon happening in New York City where prices have jumped -- but would have jumped even more without the recent spate of new hotel openings. On the other hand, rates are increasing 20 to 30% each year in booming cities like Sao Paulo and Rio de Janeiro in Brazil, where new hotel construction has not been able to keep pace with rapidly increasing demand. Start saving if you are planning a trip to Carnaval in Rio this year.
Travel deals
The gap between peak and off peak pricing is going to widen around the world. If you have the flexibility to travel off-peak (winter in Europe, monsoon in India, summer in desert and ski regions), you will find some very good prices. But if you need to travel during peak season, prepare to open your wallet very wide.
Wi-fi
The good news is that more upscale hotel chains will join their midscale counterparts to offer free in-room wi-fi. The bad news is that with more people using tablet computers, smart phones and laptops, connection speeds are going to take a big hit. Some hotels are addressing this by offering slower connections for free (for checking email or surfing the net), but charging for higher speed connections for those who wish to stream movies or upload large photos or files. While in-flight wi-fi has been a largely American experience until now, airlines in other countries are busy adopting newer satellite based systems that allow travellers to log on over land and sea. Expect to see more of this as the technology evolves in the coming year.
Mobile devices
Business travellers’ smart phones will become a bigger focus, being used to open hotel room doors and for payment as “mobile wallets” instead of a credit card. There will be more promotions encouraging the use of mobile devices to book and manage travel reservations.
Meetings and conventions
Attendance will rise at large trade shows and conventions this year as pent up demand is released. Many companies banned non-essential travel over the last two or three years, and business travellers are now eager to get out of the office and re-establish face-to-face contact with customers and colleagues. However, cost control will be the watchword as companies closely scrutinize travel expenditure. Staff will probably have to stay at cheaper hotels, fly economy and eat at less expensive restaurants.
Overall, while you may be travelling more in 2012, it’s likely that you or your employer will have to stretch limited budgets further -- meaning less luxury and more scrutiny of expenses.