Travel industry forecast of pricing predicts bumpy ride for 2020

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Each year about this time BCD Travel, which we are affiliated with, puts together some really good travel industry forecasts for the next year. (CLICK HERE) Their research is very exhaustive and backed by great data and trend analysis. I like to take their research and add my “gut” feelings of where I think things will go (and if you have ever seen me you know I have a good “gut”).  So here goes my take on travel pricing for 2020:

Domestic Airfares will go up 1% in 2020 –

This is basically flat and less than inflation.  Airfares this year have seemed very high to me. Because airfares are high I think there is not much more elasticity to go further north next year.  Even if the economy remains strong in 2020 I don’t think there is much more room for higher airfares. I think a lot of what is allowing high airfares this year has been caused by the grounding of the Boeing 737 MAX. The airlines were counting on these new planes to help them grow. United and Delta have both grown their domestic routes aggressively (5%) this year. American has decided to be very conservative and allowed others to gain market share. Southwest is waiting for the Boeing 737 MAX to start new service. The bottom line is domestic airfares should be pretty flat in 2020. If the airlines continue to expand in 2020 and the economy takes a dive then you could actually see airfares come down in 2020.

Hotel rates will climb 2-4% in 2020 –

BCD Travel is predicting a continuation of higher hotel prices in 2020. I, on the other hand, think hotel prices will start the year higher and then be flat during the second half of 2020.  Basically, they are building new hotels faster than you can make pancakes at IHOP. All this new capacity will soon (already has) put pressure on hotel room rates. We are already seeing the hotel occupancy rates, as well as the average rate in many markets, start to slowly slip. This probably tells us that hotel pricing is just like airfares and can’t push much higher in 2020.

Car rental rates should remain flat in 2020 –

The three largest car rental companies of National, Hertz, and Avis keep fighting hard for market share each year which has kept the lid on car rental prices. My favorite National Rental Car has been eating the lunch of the other two companies for the last 5 years. This year Hertz has come out swinging in hopes they can capture back some market share. Competition is really good for the consumer and I think this will be the main reason we will continue to see very little increase in car rental pricing.

Ride-sharing like Uber and Lift will zoom higher in 2020 –

I think the prices of using Uber and Lyft are about to skyrocket as much as 10% or more. I have noticed this already in 2019 and I think it will go up 10% or more in 2020. Recent legislation in California that makes drivers employees instead of independent contractors changes the whole business model for Uber and Lyft and increases expenses exponentially. Also, Uber and Lyft are hemorrhaging billions of dollars a year and their investors are starting to ask, “When will you start making money?” Ironically, this is probably the year that taking a taxi may actually be cheaper than taking an Uber.

The cost of business meals is also going up dramatically –

The cost of meals during travel is not included in the BCD Travel forecast but as everyone knows it is a very critical cost element for business travelers. Just like ride-sharing, I think new laws across the country increasing the minimum wage will put a lot of pressure on the price of meals. You can already see that at many hotels where a simple burger can cost $15 or more. I think you could see an increase of 5% to 7% for meals in 2020. Meal costs are very stealth-like and often one of the more difficult expenses to measure as they are hidden in expense reports. Many companies are considering looking at using daily meal per diems to try to address these rising costs.

Please be sure to read the BCD Travel 2020 Industry Forecast by CLICKING HERE.