The soaring cost of business travel is projected to climb even higher this year and in 2024 as relentless post-pandemic competition for airline seats, hotel rooms and hire cars drives up prices.
While the steep increases of 2022 will moderate, there's no sign the cost of work trips will stop rising, according to a report Thursday from travel company CWT and the Global Business Travel Association. Prices that have shocked travelers and defied most forecasts since covid restrictions eased are now normal, the report said.
Typical premium-class airline tickets are expected to top $4,500 next year. "We could now be looking at the true new cost of travel," CWT Chief Executive Officer Patrick Andersen said.
The report paints a mixed picture for companies around the world, from multinational corporations to small family-owned businesses, that rely on travel to meet clients, drum up revenue, or connect with employees. On the one hand, the savage price jumps of last year are over. But inflation, interest rates and splurging vacationers are still driving up the cost of out-of-office trips.
Average business travel airfares across all cabin classes -- by far the biggest single component of travel for work -- will rise 2.3% this year and 1.8% next year to $780, the report said. The single-digit increases follow a jump of 72% in 2022, when travel demand exploded. Even larger price jumps are forecast for hotel rooms and car rentals for staff on the road.
Airlines have failed to get stored planes back in the air to meet demand as fast as they would have liked. They've also struggled to recruit enough cabin crew and pilots, and wait times for the most popular new jets from Boeing and Airbus are yearslong. All these factors exacerbate a capacity shortage that continues to push up fares.
"Demand is outrunning capacity growth," Willie Walsh, director general of the International Air Transport Association, said this week.
Passenger traffic has reached 94% of pre-covid levels, according to the International Air Transport Association. The northern hemisphere's summer travel season kicked off in June with double-digit jumps in demand and planes were typically more than 84% full, said the association, which is the airline's industry's main lobby group.
To be sure, the corporate travel recovery isn't materializing as fast as some airlines expected.
Deutsche Lufthansa, Europe's biggest airline group, has recovered only about 60% of pre-covid business volumes, and is targeting 70% by year-end. British Airways is seeing similar trends and Air France-KLM doesn't expect the French domestic market to ever fully recover. In the U.S., a full rebound in business travel is being waylaid by economic concerns, according to estimates from the U.S. Travel Association.
That doesn't mean business-travel costs are going to come down, said Richard Johnson, the global head of CWT Solutions Group, the company's consulting division.
The grip on prices now enjoyed by travel providers "is not something they're going to relinquish lightly," U.K.-based Johnson said in an interview. "And why would they? 2019 is no longer really representative as a baseline."
Even if companies approve fewer business trips, the value of face-to-face meetings is incontestable, he said. The scope of corporate travel programs may be reined in, but rising costs means travel budgets themselves can't be reduced, he said.
Multi-destination business trips, an emerging practice known as trip batching, are up 10% from pre-pandemic levels, according to the report. Such trips help reduce emissions, save money and maximize employee travel time, it said.
The report from CWT and the Global Business Travel Association was based on information from more than 70 million ticketed flights, over 125 million hotel bookings and more than 30 million car hires covering data from 2018 to the present.