ADRs Increase in Most Business Destinations, While ATPs Experience a Mixed Pricing Landscape
Egencia™, an Expedia, Inc. company, today unveiled its 2011 Corporate Global Travel Benchmarking Study, evaluating the current business travel landscape and supply environment for air and hotel. Focusing on top domestic and international business destinations in Europe, North America and Asia-Pacific, Egencia analysed industry trends, supplier data and capacity implications in Q1 2011. Additionally, Egencia surveyed nearly 350 travel buyers globally regarding travel programme expectations, policies and challenges.
“We strive to provide our customers with the most insightful knowledge of the market so that they‘re able to adjust their travel policy and negotiate with suppliers,” said Jonny Shingles, Managing Director, Egencia UK. “Our proprietary solution enables us to have access to data very easily and to pass them on to our clients via our annual studies which clearly reflect industry trends.“
The study reveals that:
- For European points-of-sale, ATPs (Average Ticket Prices) for intra-European destinations decreased 4% Yoyo; yet increased 8% for North American destinations.
- For North American points-of-sale, ATPs showed increases in nearly all business destinations: intra-North America +13% Yoyo, +1% for European destinations and -4% for APAC destinations.
- For APAC overall, ATPs slightly decreased: 2% Yoyo for intra-APAC destinations and 1% in North American destinations.
- The hotel environment worldwide saw Average Daily Rates (ADRs) increase in the majority of destinations, which reverses the decline trend of 2010.
“In Europe, contrary to last year, the hotel pricing landscape has increased. But air trends remain more or less the same,“ said Christophe Pingard, Senior Vice President, Egencia EMEA and APAC.“Hotels seem to be driven mostly by demand pattern. Air seems more complex, with two opposite trends: on one hand prices rising due to fuel and tax increases, on the other hand low cost airlines and high speed rail pushing prices down.“
MAIN HIGHLIGHTS
Average Ticket Prices (ATPs)
Europe
European airlines are tightly maintaining their capacity discipline in 2011. European businesses are slowly increasing travel demand both domestically and Internationally; this has resulted in an increase in average ticket prices for specific business destinations (Dublin, Munich and Frankfurt), though the picture is more varied and not as clear cut as in North America. Increased ATPs can be attributed to rising fuel prices (although the fuel price in Euros hasn’t risen as much as the fuel price in USD due to currency fluctuations), tightly managed capacity by airlines, and airline consolidation and alliances. Tax increases in UK and Germany have also contributed to rising prices.
Conversely, in some areas of Europe, prices are being driven downward. The main factor is that competition between airlines has increased, especially due to low-cost carriers and high-speed rail. Airlines have adjusted their products and services accordingly.
Compared to 2010, the trend of ATP changes YoY has stayed the same; i.e. the ATP upward trend for North American destinations and downward trend for European destinations in general.
The chart below illustrates Q1 YoY ATP figures in top business destinations for European points of sale.
European POS ATP Change YoY European POS ATP Change YoY
Munich 9% Stockholm -10%
Dublin 3% Barcelona -11%
Frankfurt am Main 1% Manchester -13%
Moscow -3% Milan -13%
London -3% Paris 0%
Madrid -4% Marseille -10%
Berlin -4% Chicago 13%
Glasgow -5% Los Angeles 9%
Amsterdam -7% New York 7%
Brussels 0%
Sources ARC, Smith Travel
Research, OAG, Expedia Internal
Analysis
Local currency
North America
As a result of increased cost pressures in Q1 2011, ATPs have increased for most routes departing from North America. These increases can be largely attributed to higher fuel prices, tight management of capacity, strong demand on major corporate routes, and continued airline consolidation. YoY has remained the same: Average Ticket Prices continue to go up on domestic destinations, while going slightly down for overseas destinations.
The chart below illustrates Q1 YoY ATP figures in selected business travel destinations for North American points of sale.
North America POS ATP Change YoY North America POS ATP Change YoY
Calgary 28% Denver 11%
Montreal 20% Dallas 10%
Toronto 19% Vancouver 10%
San Diego 17% Minneapolis 9%
Houston 17% Atlanta 7%
Seattle 16% Washington DC 4%
San Francisco 15% Boston 3%
Chicago 15% Hong Kong 5%
Phoenix 15% Tokyo -4%
Los Angeles 13% Paris -4%
New York 12% London -4%
Philadelphia 11%
Sources ARC, Smith Travel
Research, OAG, Expedia Internal
Analysis
Local currency
APAC
Asia-Pacific represents a truly heterogeneous air pricing landscape, varying on a market-by-market basis. However, as a whole APAC is averaging a decrease in overall ATPs. Prices for Intra-APAC destinations have decreased by an average of two percent YoY, with prices for North American destinations down by an average of one percent YoY.
Decreased ATPs can be attributed to increased competition in the local markets, increased capacity on majority of routes, and the domestic and international pricing battle for Australia. Increased ATPs can be attributed to the mixed capacity environment for APAC destinations, increased fuel cost, potential of joint-ventures on trans-Pacific routes, and increased demand into India and China.
The chart below illustrates Q1 YoY ATP figures in top business destinations for APAC points of sale.
APAC POS ATP Change YoY APAC POS ATP Change YoY
Hong Kong 5% Sydney -5%
Singapore 4% Delhi -7%
Melbourne 2% Tokyo -10%
Mumbai 0% New York 17%
Beijing -1% Los Angeles -4%
Shanghai -2% San Francisco -8%
Sources ARC, Smith Travel
Research, OAG, Expedia
Internal Analysis
Local currency
Hotel Average Daily Rates (ADRs)
In the first quarter of 2011, hotel ADRs increased in most major business destinations, reversing the downward trends from the previous year. The increase in ADRs can be attributed to the return of corporate demand, reduced scale of new supply, improved occupancy, and higher air capacity.
The charts below illustrate Q1 YoY ADR figures in selected business travel destinations globally.
North America ADR Change YoY Europe ADR Change YoY
Atlanta 1% Amsterdam 9%
Boston 7% Barcelona 1%
Chicago 5% Berlin 1%
Dallas 10% Brussels 7%
Denver 4% Frankfurt am Main 9%
Houston 3% London 9%
Los Angeles 7% Madrid 2%
Minneapolis 2% Milan 2%
New York 6% Munich 9%
Philadelphia 6% Paris 10%
Phoenix 6% Stockholm 4%
San Diego 5%
San Francisco 17%
Seattle 5%
Washington DC 3%
Calgary 5%
Montreal 5%
Toronto 3%
Vancouver -27%
APAC ADR Change YoY
Beijing 9%
Delhi 0%
Hong Kong 25%
Melbourne 2%
Mumbai 3%
Shanghai 8%
Singapore 16%
Sydney 8%
Tokyo -1%
Sources ARC, Smith Travel Research, OAG,
Expedia Internal Analysis
Reflected in local currency for each city
Travel Management Trends
According to respondents of Egencia’s survey of nearly 350 travel buyers, 54 percent of buyers expect their travel volumes to increase during the remainder of 2011, with 17 percent planning to change their travel policies during the year. Additionally, 38 percent of travel buyers said they will negotiate more this year than they did in 2010.
Travel Managers universally identified cost control/reducing spend as the greatest challenge facing travel programs. Specific rankings of travel program challenges are as follows:
- Cost control/reducing expenses (79%)
- Traveler satisfaction (43%)
- Traveler compliance/policy enforcement (42%)
- Capturing a full view of travel spend (40%)
Compared to last year, the challenges reported in 2011 are mainly the same, with Cost Control still being at the top of travel buyers’ mind but a greatest focus on Traveler Satisfaction and Traveler Compliance.
Research Methodology
Forecast and projections are based on the statistical analysis of the past and present industry trends, macroeconomic factors, market research and vendors’ capacity forecasts for 2011. Smith Travel Research (STR) and OAG filings were leveraged for a market-level analysis of both Lodging and Air capacity. ARC, STR and Expedia Internal Data were used for market-level analysis of pricing.
