Stronger Economy Means Higher Travel Pricing In 2018

BOSTON — Travel prices are expected to rise sharply in the coming year, reaching nearly 4% increases in some sectors, according to the 2018 Global Travel Forecast.

The fourth annual forecast, released July 18 by the GBTA Foundation in partnership with Carlson Wagonlit Travel, and with the support of the Carlson Family Foundation, shows global airfares are expected to rise 3.5% in 2018; hotel prices are expected to be 3.7% higher; and ground transportation such as taxis, trains, and buses are expected to rise only 0.6%, much less than the 3% inflation forecast for 2018. The report was released during the Global Business Travel Association’s annual convention in Boston.
 
“Geopolitical risks, uncertainties in emerging markets, and ever-changing political environments in Europe and the U.S. mean today’s travel professionals have more than ever to take into account when building their travel programs,” said Jeanne Liu, GBTA Foundation vice president of research. “The most successful programs will have to keep a watchful eye on both geopolitical risks and a rapidly-changing supplier landscape as they reevaluate strategy often and adapt as necessary.”
 
“The higher pricing is a reflection of the stronger economy and growing demand,” said Kurt Ekert, president and CEO, Carlson Wagonlit Travel. “The global numbers from this forecast should be considered strong leading indicators of what 2018 will mean for global businesses, as we anticipate higher spending.”

Los Angeles Times GBTA article here

2018 Air Projections
The rise in global airfares comes as crude oil prices rise, in spite of airlines adding an expected 6% capacity in 2018. Complicating airline pricing is increased segmentation of basic fares among large carriers, as travelers now have the option of choosing a basic economy, restricted fare versus various upgraded fares, with specific service options and pricing varying by airline.

• Asia Pacific expects to see a 2.8% rise in 2018 pricing with domestic demand increasing, particularly in China and India. However, as many of the economies in Asia strengthen, weaknesses in infrastructure, and airports in particular, are becoming more apparent. 
• Across EMEA, air travel is expected to grow, with prices rising a whopping 7.1% across Eastern Europe and 5.5% in Western Europe. However, Middle East and African countries only expect a 3% increase as they face ongoing security threats and an oil industry still in recovery. Currency fluctuations in Europe may further impact airfares in 2018. Given limited competition and the upcoming summer 2018 World Cup Soccer tournament in Russia, Eastern Europe may again have the most significant price increases in the region. 
• Across Latin America and the Caribbean, prices are expected to change little in 2018 – up only 0.3%. Airlines have cautiously added capacity back into the market. Broader analysis of South America shows a 20% increase in scheduled flights by the end of 2019. Low cost carriers are well positioned for this area given the low penetration in the region. Newer, more efficient aircraft coming into in operation will lower operating costs in 2018.
• North America will see prices rise by a modest 2.3%, according to our projections. Citing the potential for stronger U.S. travel restrictions, flights to the U.S. have already been reduced accordingly. Canadian airlines are expected to aggressively compete given new market entrants and capacity growth of about 11% in 2017 and 12% in 2018. With the region’s air travel market nearly flat year-over-year in early 2017, competition is fierce between carriers who now compete on branded fares rather than on bundled fares or by carrier type.

 2018 Hotel Projections
Globally, the 3.7% average increase in hotel prices masks developments on a regional level. Europe is expected to post strong increases, while other regions are barely keeping up with inflation. Additionally, prices are expected to fall in Latin America and the Caribbean. We expect the impact of the 2017 mergers will be felt during the 2018 RFP season.
 
Suppliers are progressively moving corporate buyers away from fixed, negotiated hotel rates and toward dynamic rate pricing. There is also a global trend towards “smarter” hotels, with hotels investing in beacon technologies, messaging, in-room entertainment and more. Increasingly tech-savvy guests will use apps to check in and out, unlock their hotel room door, operate the television remotely and control room temperature.
 
Across Asia Pacific, hotel prices are likely to rise 3.5%- with a large discrepancy as Japanese prices are expected to fall 4.1%, but New Zealand is set to rise a full 9.8%. Strong economies means demand is increasing in the APAC region. Buyers should anticipate a more challenging discussion with newly merged hotel groups, especially in high-volume markets such as Bangkok, Beijing, Shanghai, and Singapore.
 
Across EMEA, hotel prices are likely to rise: 6.6% in Eastern Europe, 6.3% in Western Europe, but only a modest 0.6% in the Middle East and Africa. Norway is expected to lead with increases of 14% expected for 2018, while Russian hotel prices will rise 11.9% thanks to increased demand from hosting the 2018 Summer World Cup.    
 
Revenue per available room growth is expected for most major cities across Europe in 2018, with Porto and Budapest leading the pack. With its halt on hotel construction, Barcelona may join the top five cities for occupancy rates, while Amsterdam has implemented a “hotel stop” policy to limit new hotel development. Dublin is increasing supply through 2020. There has been a large increase in upscale hotel transactions in the United Arab Emirates as oil prices start rising again. Use of sharing economy players will remain limited as governments tighten control.
 
Within Latin America, hotel prices are expected to fall 1.2%, with steep declines in Brazil (down 8.7%) and Argentina (down 2.3%). However, Peru (7.7%) and Chile (5.5%) are expected to see increases. Buyers may see efficiencies in 2018 as bigger brands purchase independents and upgrade systems. Capacity is being added throughout the region with an estimated 449,500 new hotel rooms being constructed between late 2016 and 2025, a 57% increase in supply. Sharing economy accommodations are still not very popular for corporate travel in Latin America, given structural security concerns.
 
North American hoteliers may be banking on economic growth as demand has leveled off since mid-summer 2016, but supply is expected to continue growing steadily through 2018. With international travel projected to grow 4% in 2017 and 2018, U.S. hotel growth is expected to be concentrated primarily along with the West Coast and in Washington D.C. In Canada, Toronto, Vancouver, and Montreal are expected to maintain good pricing power amid a weak Canadian dollar.
 
2018 Ground Transportation Projections
Ground transportation pricing is expected to rise only 0.6% in 2018 (but 5.5% by 2022). Industry experts predict record new car sales over the next five years, pushing up per unit fleet costs, while used car pricing is expected to fall 50%, hurting residual value for used rental cars and making current rental car pricing unsustainable. Market-specific regulations for curbing emissions, and rising oil prices have suppliers’ already increasing availability of “green” rental cars.
 
Sharing economy players such as Uber and Lyft are expected to continue double-digit growth upwards of 10% in 2018, before settling down into single-digit growth for 2019. Their growth is under threat by costly regulation and government bans.
 
Continued uncertainty in mining, and a cautious recovery in the oil and gas industry will result in flat rates for 2018 in Asia Pacific. Business keeps growing in China as most major car rental and sharing economy suppliers have a presence. Sharing economy suppliers Didi Chuxing in China, Ola in India, and Grab in Southeast Asia have all achieved economies of scale that make them key competitors to more traditional car rentals firms and taxis. Meanwhile, Malaysia and Singapore are pushing ahead with a high-speed rail line from Kuala Lumpur to Singapore. Construction is not expected to be complete until 2026, but figures to strongly compete when finished.
 
Ground transportation remains very competitive in EMEA. Prices are expected to remain mostly flat in Europe, and up a meager 1% across the Middle East and Africa. Rail continues to be a viable alternative to air travel throughout Europe, especially with enhanced security at airports. The continued expansion of Enterprise, the re-emergence of Budget, and the continued impact of new players like Uber and Lyft are all creating downward pricing pressure for 2018. Both Uber and Lyft have been banned in some markets and restricted from airport access in others as governments turn their attention to regulating this new industry segment.
 
Prices are expected to rise slightly (1%) across Latin America. Brazil and Mexico are anticipating increased demand for car rentals in 2018 as their economies rebound. However, the rental car market is still heavily fragmented. Uber is betting big on its Latin American business (despite issues in Brazil, Peru and Argentina) – especially after its recent departure from the Chinese market. Regional and international rental companies continue to expand and pricing is expected to stabilize.
 
Canada is expected to see a healthy 4.6% increase in 2018, but the overall region will only be up 1%. Limited railways, along with improved income per capita and increased corporate travel, are expected to push up rental car rates in North America. Still a low-margin business, rental car companies have implemented operational efficiencies and invested in technology to better manage fleets and improve usage. Sharing economies continue to grow, but face improved competition from traditional cabs and government regulation.

Source: GBTA press release

About the 2018 Forecast
Forecast projections provided by CWT Solutions Group. Data analysis provided by Rockport Analytics. The report, 2018 Global Travel Forecast, is available exclusively to GBTA members by clicking here and non-members may purchase the report through the GBTA Foundation by emailing pyachnes@gbtafoundation.org. Download the report.

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Operators Of All Fleet Sizes Tackle Best Pricing Practices

MIAMI BEACH, Fla. — Pricing is a hot topic in today’s market — not because of TNCs, but because of the disruption caused by the technology that has allowed them to win over the hearts of the public. At the Summit, six operators from different markets who serve varied clientele helped answer burning questions.

What do you find are the best ways to drive demand to your service so you can maintain price integrity and make yourself wanted?

Mike Barreto, COO of Eagle Chauffeured Transportation Services in Upland, Penn., has been both a small operator and worked for one of the largest operations in the industry. He said operators must start looking at what’s being done outside of the chauffeured transportation industry.

“The hotel and airline industries have been able to create wealth in the services they provide,” he said. People are willing to pay extra for first or business class service, priority passage, and extra miles. These “bonuses” are what get passengers to shell out more money.

“We have to be able to create a better mousetrap that would enable us to have a pricing strategy in place to give them entry-level options if they want it,” he said. If clients do want extras, operators should be able to charge for those as well.

What are the most sophisticated pricing models in the service world that would best apply to limo operations?

Richard Fertig, president of Brilliant Transportation in Brooklyn, N.Y., built on Barreto’s airline example. “It’s very unlikely the person sitting next to, in front of, or behind you paid the exact same dollar amount for their seat. You know if you book too far in advance or too late, you might be paying a premium. There’s generally a sweet spot,” he said.

Limo companies certainly don’t do as many on-demand rides as a TNC, so the best way to go about figuring out pricing is to forecast. Do you know a specific date and time are going to be popular? “Maybe rush hour at seven until nine in the morning is a time when you’re sold out. It seems to me like you should charge more for that than noon on a Tuesday, when you have a lot of inventory,” he said.

He suggests looking at your historic busy periods versus slow periods. “I wouldn’t recommend you charge a premium, because nobody likes paying a premium. That should become your base rate, and then offer a discount. If you’re charging $100 an hour during prime periods and it’s a slow period, extend a discount.”

Another way you can work pricing is by availability. When your reservation agents look at a vehicle class and notice you have only three more minibuses or one more van, prices rise. If you have 10, consider lowering the price.

Scott Solombrino, CEO of Dav El / BostonCoach Chauffeured Transportation Network, said the problem with the corporate market is they dictate x rate for x transaction every day, and if you can’t do it, then they’ll find somebody else who can.

“So unless you have an industry-wide program, you would never get corporations to go along. We just don’t have that type of pricing structure where we have the power to tell corporate America we’re going to go with a specific pricing on a Tuesday in New York because it’s going to be more busy. On the retail side, you could do all of that and I think it’s a great concept to retail.”

What do you believe is the feasibility of industry companies and affiliates setting rates in real time like airlines, hotels.com, and any number of travel websites based on demand?

Nick Lopez, vice president of operations for JACO Limo in Lousville, Ky., made the point each market in the industry has different regulations, which can make pricing tricky. “We all have a lot of things specific to our market to determine what we can and can’t do, so there’s not a blanket way to do things,” he said.

Fertig posed a question to the audience: How many times do you go to a website looking to book a flight or hotel reservation, put in your dates and times, and don’t get a rate?

“How many of us can go to different markets or even our own market and go to a fellow operator’s website and try and look up a rate? It amazes me how many of us have all of these beautiful websites, but I can’t get a rate there. I’ll have to email you or submit a form. I might have to wait 24 hours, two days, who knows? You’re doing yourself a true disservice if you don’t offer your potential clients real-time rates through your websites or mobile applications.”

Robert Xavier, CEO of Legend Limousines in Smithtown, N.Y., agrees listing prices on your website can help. “I’ve put our rates on our site and I also think you also have to include some kind of educational material that shows why you’re worth more.”

What is the viability of pricing per mile, per zone, and/or per minutes/hours versus flat rates and hourly as directed? How could this be a benefit to operators and clients?

Nick Kokas, vice president of Brentwood’s Distinguish Executive Transportation in Michigan, believes with the onset of TNCs, having a time and a mileage formula within your database systems allows you to offer clients an infinite amount of pricing strategies.

“Therefore, it’s very hard for us to maintain databases of point A to point B times infinity. I don’t think any of us, even if you want to do hundreds of thousands of trips, have the manpower and data needed to calculate something like that,” he said.

Solombrino chimed in: “What’s so funny about the whole thing is [the TNC] business models haven’t improved — they’re failed business models already. And there’s nothing wrong with using time and distance, because time and distance determines what your fixed cost from a mileage perspective to run the vehicle is, including insurance and fixed cost of labor. At some point you can calculate the rate of what you should be charging them to profit. That method has been used for 50 years. There’s nothing wrong with that model.”

Kokas argues it’s important to know what kind of clients you cater to. “The time and mileage calculation is for people that have many vehicles roaming around and are going to offer service superior to TNCs and taxis, but really want some of that on-demand sort of point-to-point.”

He used an example to illustrate: Do hotels charge customers by how many minutes you spend in your room? Or do they charge per 24 hours? Motels use a different business model, where one can pay by the hour and meet a very different need.

“My point is, just because there’s a time to mile sort of calculation doesn’t mean that’s the right one for your business model,” he said.   

— Lexi@LCTmag.com

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How To Sell Limo Service To Corporate Buyers

MIAMI BEACH, Fla. — As a rising number of corporate clients flirt with, if not outright embrace, transportation network companies for business travel, chauffeured vehicle providers must make clear what they do better.

That means pushing the message of safety, service, and duty-of-care with corporate travel managers and procurement officers, while cultivating better business relationships through more frequent contact. Three LCT Leadership Summit panelist experts expounded on those themes May 23 in a presentation, “How to Monetize the Millennial Business Travel Sector.”

Know Thy Buyers
Operators should be aware that a corporate client often consists of three types of customers in the company: A procurement officer, a travel manager, and the individual executive or employee travelers using the services.

“Sometimes we don’t even understand ourselves,” said panelist Jorge Gomez, who runs the corporate travel program for Miami-based Mondelez International. “Within our organization, you might have separate travel and procurement divisions. Now you have two sets of customers with different ways of looking at the business. Then you have a third one, which is the internal customer. It’s kind of complicated because you have to balance all of their goals.”

Limo operations should create solutions for the corporate travel buyers, Gomez said. “To satisfy the internal customer from a service perspective, it has to be a common goal, because the internal customer is not going to be any different just because the one leading the relationship is the procurement guy or travel guy. The internal customer is the same.”

Millennial generation travelers, younger adults ages 35 and below, are making this equation more challenging, because they think and act differently than older generations, Gomez said. “You need to adapt and you need to make yourself different.” To get their attention varies, as companies follow different policies on doing business with TNC disruptors, he added.

Lyft is one example of a TNC that builds cohesive relationships with corporate travel managers and the corporate travel department, said panelist Lenore D’Anzieri, chief strategy officer for Limo Alliance, an app developer in the limousine industry. “They understand the corporate travel buyer a lot more and have taken the time to create those relationships with their buyers. They’re in the marketplace being very sweet and understanding and listening, and wanting to give the travel managers what they want. They’re working on a robust reporting system that most don’t have. I think Lyft is actually coming out of the gate much stronger. Uber is becoming very obnoxious, which is why a lot of the travel managers are not very happy with them.”

Cultivating Connections
Managing relationships with buyers via account managers is one way operators can distinguish their corporate service, said Mark Williams, founder of Goldspring Consulting, an independent travel consultancy. “Uber and Lyft don’t have account managers. They’re focusing on their app and driving the business through the app.”
Williams finds a lack of interaction between the buyer and the limo companies, unless it’s a large account. “When I was at PricewaterhouseCoopers, we were doing $50 million a year, and so we got attention, but that’s going to be the unusual one.

“Those touchpoints are so important because they allow you to deliver the message of where do you beat these disrupters? The additional services you provide, and the added levels of safety and security and vetting of drivers, get lost. That end user doesn’t focus on that unless somebody gives them a message.”

Timely Data
Procurement executives are motivated to show value inside their organizations, and prove they can save money. The more information they get, via an account manager who supplies reports, the more it helps the corporate clients, Williams said.

“Reporting is important because it supports whatever the strategy is. If you are the travel manager, you want to know how we are serving our internal customers. Are there any complaints? Are there timely pickups? Are there timely drop-offs to the destinations? You have to show that because they don’t always have the resources to do that. They’re probably going to depend on you.”

Understanding your buyer and the reporting they need and how it can help save costs are critical to the success of your relationship, D’Anzieri reiterated. “Cost savings doesn’t necessarily come from price. I think 90% of the time, you don’t lose an account because of prices. It’s the way you sold or maybe the lack of understanding of your customer. What do they need? What do they want? What are their goals? How do I help them achieve their goals?”

[PAGEBREAK]

Outside Views
Gomez advised attendees to look outside the industry for more professional ways to handle procurement clients and increase revenues and profits. “The airlines and hoteliers have learned from one another how to develop revenue management strategies. Look at their practices and see how you can adapt and put it into your industry.”

Tell The Story
Williams explained how travel buyers are willing to pay more post-recession for better service. He cited a recent anecdote from Delta Airlines, which is getting a 10% premium over competitors. “I think what needs to happen here is the story isn’t getting told. You’re not telling the story of what you can do and how you are better and the advantages you have over the other players disrupting the marketplace. If you tell that story effectively, people will pay a premium for that level of service.”

Some companies already prohibit use of TNCs because of duty-of-care issues, but for the many who don’t, they need to hear about the advantages of duty-of-care during the RFP process, Gomez said. “You have to demonstrate that to the marketplace. It has to be on every single RFP, and the meetings you show up at. Put it in their face on every presentation, on every review, on every RFP. What are the values? Show the non-traditional value creation you could generate for them. Let them decide whether they can report on it or not.”

Ratify Certify
Many organizations simply don’t deal with the duty-of-care issue, and punt the decision to individual travelers who often prefer the conveniences of an app, Williams said. “They don’t have to talk to anybody.

They can get the car, get in, and get out without saying a word. Millennials in particular like that. But your question is, why doesn’t the industry develop a certain level of standards that becomes a certification for providers you can then market to the buying community? You know Uber and Lyft aren’t going to qualify because they don’t meet those standards. This becomes a big marketing point for you.

“You want to walk in with an RFP and say, ‘We’re certified, these guys aren’t. Do you really want to risk the most vulnerable part of the trip on an accident or an injury or even a death with someone who’s not certified like we are?’” Williams asked. “I think that’s where this industry has to go, and you’re missing the boat because you’re not doing that.”

Competing on price is no longer sustainable, Gomez said. Certification can provide the distinction that attracts corporate travel buyers. “There’s a lot of noise in the market, so that creates confusion. That’s why you have so many buyers going in different directions. So that certification simplifies the way you can create that differentiation.”

Risk Factors
In an ensuring discussion among attendees, the point emerged how ground transportation carries more risk for death and injury than airline flights and hotel stays. The death of a senior, high-profile executive crucial to a company’s success in a vehicle could be devastating. Persuading companies to reduce risk through responsible duty-of-care providers becomes crucial to validating the relevance of non-TNC chauffeured ground transportation.

“You need to get out in front of your buyers,” an audience member said. “You need to attend GBTA meetings, call your buyers, and understand them. You need to be visible in that community so they can lean on you. That will give you all the opportunity to explain your story and tell the story of your industry. The passion you all have, I think, is critical to educating and helping your buyers understand where you’re coming from, what your offerings are, and how you differentiate. If you sit in your offices and do nothing about it, it’s just not going to happen.”

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Clean, Cool Lincoln Town Car Provides Classic Experience

ORCHARD PARK, N.Y. — An oldie, but goodie. Trusty, but not crusty. Many sayings could apply to a 2011 Lincoln Town Car L, the last model year for the most popular limo sedan in the history of the livery industry.

Airport runs and business trips still turn out smooth and luxurious for clients in this extended wheelbase sedan. A 2011 Lincoln Town Car L from Towne Livery is now available for $13,995 at 109,000 miles on Limoforsale.com.

With many Town Cars running upwards of 250,000 miles, this sedan staple can still offer years of comfort and class to any chauffeured vehicle fleet. 

SPECS, PHOTOS AND CONTACT INFO HERE

The vehicle fits five people and has new tires and brakes. This fleet zenith is ready to roll, so if you’re in the market for a reliable car, this could be “the one”.

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BMW’s 740e iPerformance Boasts Good Fuel Economy

The BMW 7 Series has been boosted with V8 and V12 options galore since it launched in 2015, but there’s been no hybrid variant to cater for oligarchs with an environmental conscience.

That hole in the market has now been plugged with the 740e iPerformance, a limousine with claimed economy figures to rival three-cylinder hatchbacks.

Gizmag article here

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Bentley Considers New Mulsanne-Based Sedan

Bentley is considering building an exclusive sedan based on the current Mulsanne, Automotive News Europe reports. The new model would be built in small numbers and be positioned above the current flagship sedan in the Anglo-German automaker’s lineup.

Autoweek article here

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Beverly Hills Pushing For Fleets Of Self-Driving Cars

The California city has met with such tech giants as Google and Apple to drum up interest (and investment) in an effort to become the first municipality to integrate self-driving vehicles into its mass-transit infrastructure.

The Hollywood Reporter article here

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Cadillac CT6, XT5 Buoy Global Sales Rebound In June

With deliveries down by 18% through May, the company dismissed the drop as an unsurprising consequence of the SRX’s retirement and gradual rollout of the new XT5 and CT6.

The XT5 has already reached more than 6,700 sales through June, while the CT6 is still climbing with nearly 3,600 units after its launch early this year.

Total global sales sit at 129,168 vehicles in the first half, just 1.5% below the same period last year.

Left Lane article here

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