American Express Global Business Travel, part of the world’s largest travel services company, is predicting that airfares will fall in 2017, according to its annual Global Travel Forecast. Rodolfo Elizondo, Vice President and Head of Global Business Consulting at American Express Global Business Travel believes travelers will welcome the news. However, many suspect that ancillary fees, such charges for baggage or extra legroom, will somewhat offset the lower fares as airlines continue to look for new sources of revenue.
According to the forecast, business class fares for short haul travel within North America is expected to decline by 2.5 percent to 5.5 percent, on average, next year. Average long haul fares are expected fall between 0.2 percent and 4.6 percent. ‘Economy’ fares are predicted to decline around 3 percent for short haul trips, and around 1.5 percent for long haul trips. The average price in all of those fare categories have fallen year-over-year for the past three years.
According to data from federal Bureau of Transportation Statistics, the average fare for U.S. travelers in 1995 was $454, adjusted for inflation. That figure peaked in 1999 at $461, but has declined about 23 percent since then. This year, the average fare is around $361.
Travel demand remains strong, especially in North America, but competition is heating up. The biggest U.S. airlines are slowing down their previously aggressive capacity growth plans. Several have cancelled or deferred deliveries of new planes. Some are introducing new low-cost fares to better compete with ultra-low cost rivals like Spirit and Frontier.
The slowdown of the Chinese economy, depressed oil prices, the Brexit, growing populist politics, and increased security concerns in many countries have created uncertainty in the global travel marketplace. In Latin America, moderate decreases are expected across Brazil and Argentina due to low demand, while Chile and Mexico may see fare increases due to their stronger economic performance. Overall, the Zika virus threat has had a minimal impact on the number of tourists going to the region in 2016, and the same is expected for 2017.
AmEx’s forecast predicts that hotel room prices will rise by between 2 percent and 4.6 percent in North America, with smaller increases expected in many other parts of the world. In the United States, car rental rates for corporate travelers will remain flat in 2017. A softening of car rental rates is also expected in Canada.