A Glimpse Into 2017: Forecasting Supplier Prices Jon Gray, VP Research & Insight Rockport Analytics Yon Abad, Sr. Director CWT Solutions Group Americas
Session Agenda Introduction Methodology Macroeconomic Overview 2017 Travel Price Forecast Overview by category and region/country Q&A
For the 3 rd year 28 countries and 10 US cities Airlines, Hotel, Rental cars, Meetings & Events Forecast in USD, guidelines on currency exchange forecast
METHODOLOGY 2017 Travel Prices Outlook
Methodology Consumer & Producer Prices GDP Employment Oil Prices Corporate Profits Industrial Production Demand Side Drivers Supply Side Drivers Model Output CWT Transaction Data Judgment Layer Judgment Layer Final Forecast Values STR Global OAG IATA Rental Car News Economist Review CWT Regional Lead Review GBTA Review CWT Executive Review
MACROECONOMIC OVERVIEW 2017 Outlook on Key Economic Drivers of Global Travel Prices
Percent change Emerging Markets Weigh on Global Growth 10 8 6 4 2 0-2 Real GDP Growth -4 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 World Advanced countries Emerging markets Source: International Monetary Fund, IHS Global Insight, OECD, Rockport Analytics 2015 @ 2.6% 2016 @ 2.6% 2017 @ 3.1%
Corporate Demand to Pick Up 6.7% in 2017 North America: 4.6% Europe: 6.7% Latin America: 5.2% Asia-Pacific: 7.8% MEA: 8.4%
Average U.S. Airfare Average spot price per barrel (WTI) Oil Prices Appear to Have Found A Bottom Correlation Between Airfares & the Price of Crude Oil $400 $390 $380 $370 $360 $350 $340 $330 $320 $310 Brent Projected @ $49/barrel 2017 $300 0.00 120.00 100.00 80.00 60.00 40.00 20.00 Average U.S. Airfare Average price of crude oil Source: Bureau of Transportation Statistics, U.S. Energy Information Administration
US Dollar Index March 1973 = 100 Is the Dollar Rally Running Out of Steam? Weighted Average Exchange Value of U.S. Dollar: Broad Index 115.00 110.00 105.00 100.00 95.00 90.00 85.00 80.00 75.00 70.00 20% USD appreciation since 2011 Another 2% gain expected in 2017
2017 Foreign Exchange Rate Forecast (yr.-over yr. Growth vs. US$) Brazil Australia United Argentina Malaysia Mexico Canada Kingdom* Russia -4% -2% Vietnam 1% 3% India 5% -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% -1% -8% -6% Japan -3% Source: IHS Global Securities, International Monetary Fund, Wells Fargo Securities, Rockport Analytics Colombia Indonesia Euro Area France Germany Greece Italy Spain Peru China Philippines Chile Thailand $USD (baseline) *The UK GDP forecast value was established pre- Brexit. Accordingly, this value may be revised in the months ahead.
What Does Brexit Mean for Travel Prices in 2017? The UK economy is only 3.8% of Global GDP Will have very small impact outside of Europe Weaker GBP Relatively cheaper travel for firms buying travel goods & services in the UK Weaker EUR (except vs GBP) Relatively cheaper travel for firms buying travel goods & services in the Euro Area Restrained economic growth in the EU & UK Relatively less travel demand and slightly less price growth in Europe
Watch Out For Risks to Our 2017 Price Forecast! Oil prices Brexit Fallout Central Bank Policy Exchange Rate Fluctuations Emerging Markets Geopolitical Events
2017 TRAVEL PRICE FORECAST OVERVIEW By category and region/country
Airline prices to increase on a global basis
Airline prices to increase on a global basis +2.5% Highest margins ever but decrease of revenue/seat in 16 Reduction of the gap between Legacy and LCC Unbundling of fees Sharing economy for air travel?? Global Airlines prices forecast for 2017 (vs. +0.5% in 2016)
Slight decrease of air fares in APAC overall Australia fares down driven by slow demand in the west and MEA careers additional supply China settling in to its softened demand and a new normal : stable and controlled growth. India/domestic remains the most competitive market in the world. International traffic on the rise Singapore impacted by changes in traffic/cabins and competition on transpacific routes Flat for Japan but strong impact of JPY projected exchange rate
Mixed picture and uncertainty in EMEA Recovery in Russia and probabilities of consolidation Strong drive to increase yield and fares in Germany LCC competition on all segments in France, pressure on costs Brexit will have most probably have impacts on fares and airlines capacities
Difficult times ahead for Latin America Economy remains unstable in LATAM, pressuring corporate and leisure demand Strong currency exchange impact in Argentina and Brazil Mexico and Colombia enjoying a more stable situation and perspective of growth Prospects of consolidation
Solid 3.7% growth expected in North America High load factors, capacity discipline and increased reactivity balance with increased competition from LCC Consolidation in the West Intense competition and further segmenting of booking classes/cabins Ancillary fees keep on leading the way 2017 AIR PRICE PROJECTIONS: NORTH AMERICA
Some uncertainties for the hotel market End of a cycle? New entrants? New customers? How to improve yield?
But still the dynamics of a sellers market +2.5% Mergers & Acquisitions Sharing economy opened new market opportunities Increase of auxiliary fees Global Hotel prices forecast for 2017 (vs. +2.5% in 2016) Supply vs. Demand rules market/market
Mixed picture but -0.6% rates decrease expected overall in APAC Australia rates driven by demand in the East China has the biggest pipeline in the world and will increase its VAT Slow growth of demand in Hong Kong Hotels still struggle in India with competition from guest houses and now sharing economy Rates decrease in Singapore after years of increasing supply and inflation Japan remains in a very dense situation but forecast is impacted by JPY volatility 2017 HOTEL PRICE PROJECTIONS: ASIA PACIFIC
+1.8% increase in Western Europe 2017 HOTEL PRICE PROJECTIONS: EUROPE, MIDDLE EAST & AFRICA Slow growth of the demand overall driven by geo political events Increased supply in the luxury segment in France Germany remains a very strong corporate market and this might even amplify after Brexit Impact of Brexit to be determined in the UK with a lower GBP Nordics demand impacted by the oil/gas crisis Growing supply in Russia (Olympics, Worldcup)
Decreases in LATAM, Robust +4% in NORAM Supply growth in LATAM but demand will not necessarily follow Tale of 2 coasts in North America High single to double digits growth in the West coast (LA, SF and bay area) More moderate for the East coast Rates reduction in NYC and Houston Consolidation will most probably start having an impact in 2018 2017 HOTEL PRICE PROJECTIONS: LATIN AMERICA & NORTH AMERICA
Intense competition and flat market for rental cars
Intense competition and flat market for rental cars Over fleet and competitive industry climate dictates flat pricing Strong investments in customer service and technology Lower operations costs US-based companies keep on extending their coverage through partnerships Pressure from alternative, traditional and new ground transportation suppliers (Addisson Lee/Tristar merger) 0.0% Global Rental Cars prices forecast for 2017 (vs. +0.1% in 2016)
More control, moderate growth for meetings & events
More control, moderate growth for meetings & events Rationalization: less events, more attendees, midscale hotels Prices down in the Americas due to higher maturity Cost control and regulations Improved sourcing (lead time) and improved negotiations More supply and creative venues Lower meetings management maturity in EMEA and APAC
Q&A
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