Uncertainty around Iran’s nuclear aspirations and unrest between Sudan and South Sudan is sparking new fears of oil price increases, according to Advito, the independent consulting unit of BCD Travel. As a result, global oil prices for the remainder of 2012 will begin at US$115 per barrel as the “best-case” scenario. At the same time, corporate travel demand, especially in the U.S., is coming back stronger than expected, resulting in growth of the domestic market and acting as a business driver for South America as well, according to Advito’s analysis of BCD Travel client travel data.
Advito’s May update to the 2012 Industry Forecast, is based on an assessment of current economic parameters, including year-over-year booking data from the fourth quarter. Advito has revised upward its initial 2012 airfare forecasts for Latin America and the Middle East since release of its February Update.
“Given current macroeconomic volatility, we caution buyers that the Advito forecast is more subject to change than usual,” said Bob Brindley, vice president for Advito, an independent operating unit of BCD Travel. “Outright recession in major markets, a subsequent drop in consumer confidence and a potential credit crunch from banks unwilling to lend could lead to a significant fall-off in demand. If that happens, airlines will have a much harder time sustaining projected fare increases and airfares could fall.”
Other key findings in Advito’s May Update to the 2012 Industry Forecast include:
- Europe’s financial crisis is not yet over, but tensions are easing a little following implementation of an early warning mechanism. Rising bond yields in Italy and Spain, however, remain cause for concern.
- U.S.economic indicators have stabilized, and new strength in recent months is sparking an uptick in economic optimism worldwide.
- Air travel demand is set to outpace supply, given ongoing capacity cuts by airlines. The imbalance has already resulted in some price hikes in the U.S.and looks likely to lead to similar hikes in other regions over the course of 2012.
- Changes to hotel rate forecasts are limited to Argentina (high inflation), Switzerland (being less affected by European woes), India (increasing inventory), the Czech Republic (fallout from the Eurozone crisis), and Russia (softened demand).
For more detailed information on key trends in travel management for 2012, as well as recommendations for travel buyers, please refer back to the original Advito 2012 Industry Forecast.