The 2024 State of the Industry with Rossana Martin

Rossana Martin is back to connect with Chad and Miriam about the state of our industry and this is one episode you don't want to miss! 

As usual, Rossana takes us "around the world" to discuss industry insights, giving special attention to air and hotel rates in each global region and how rates might change in 2025.

If you have a global travel program, or simply want to know what's going on in the world of business travel, this episode is a must listen! 

Learn more by visiting https://www.bcdtravel.com or https://www.linkedin.com/company/bcd-travel/

Transcript

Intro:

Welcome to Connections with BCD Travel, an ongoing conversation about the modern day travel program, the impact of technology, and how travel buyers can take control and drive change. What are we waiting for? Let's start connecting.

Miriam Moscovici:

Welcome back to the podcast, everyone. I'm Miriam Moscovici, and I lead the Partnerships and Intelligence team at BCD Travel.

Chad Lemon:

Hello. Hello. I am Chad Lemon and I work in Digital Strategy and Advancement at BCD. A quick reminder before we get into today's episode that we love hearing from you and we have two quick, easy ways to do it. First, you can head to bcdtravel.com/podcast and drop us a note there, or if you're listening on a major podcast platform like Apple or Spotify, you can click the text us link and send an anonymous message.

Miriam Moscovici:

Chad, we are getting close to the end of our second season.

Chad Lemon:

I know. Second to last episode. It's weird, right? I love doing this with you. I love having all of our guests. Not going to lie, I'm looking forward to the holiday break though. I'm sure you are too.

Miriam Moscovici:

Yeah, me too. And I don't know if you can call it a tradition yet, but last season we reserved our second to last episode to do a final state of the industry. We did that episode and I say we do the same this year.

Chad Lemon:

Yeah, yeah, absolutely. The state of the industry episodes are generally some of our most popular, and truthfully, I like them too. I love hearing about what's going on across the globe and across the industry and looking forward to what might be coming.

Miriam Moscovici:

Well, we've had her on our show many times, but on this episode we welcome back Rossana Martin, senior vice president of Global Sales of North America at BCD. Affectionately, we always joke that Rossana is a star student and knows everything about everything.

Chad Lemon:

Absolutely.

Miriam Moscovici:

So I'm excited to hear what she has to share with us today.

Chad Lemon:

Yeah, she is, absolutely. And while I agree with you, I'm also curious to get her perspective on business travel in 2025. So let's get to it. Welcome back, Rossana. It is always great having you on the podcast.

Rossana Martin:

Hello and thanks for having me back. I'm very excited to get started.

Chad Lemon:

Absolutely. Okay, you know the drill and you know what question one is. What is the state of the industry right now?

Rossana Martin:

Well, the corporate travel industry has proven to be strong and profitable in 2024 with spending projected to reach record highs. GBTA projected that global travel spending will have reached more than 1.5 trillion this year-

Miriam Moscovici:

Wow.

Rossana Martin:

... surpassing pre-pandemic levels. A lot of this is due to economic stabilization, pent-up demand, and a return to traditional travel habits. And I think what I found is this is in line with findings from the fourth edition of Deloitte's survey of travel managers, travelers and budget owners. That survey was conducted between May and June this year, and it indicated that corporate travel spend would grow by 8 to 12% in '24, well ahead of industry projections. And frequency of travel is now up with travelers taking more trips on average and/or longer trips than before.

And the same study indicated that corporates are expecting a 15% travel budget increase in 2025 as opposed to this year. And I just spoke to a client from Asia the other day and they were telling me their average trip is now 5.1 days. So it's more than double what it was pre-pandemic. So it's interesting. Yeah, and I think we're expecting the business travel market to continue to grow. So the compound annual growth rate was projected at 12.3% from '23 to '24. And from '25 to 2028, growth is expected to moderate gradually, but that growth rate is still expected to be close to 7%.

Chad Lemon:

Well, you were on the podcast a few months ago and gave us a state of the industry during the summer. Do you feel like your outlook has changed much or have things stayed fairly consistent for you?

Rossana Martin:

Well, overall, it's shockingly been fairly consistent since June with the exception of some hotel rate changes that we've seen in LATAM and Mexico.

Miriam Moscovici:

Rossana, last time we had you took us on this trip around the world and visited all the regions to give us updates. And can you do that again this time?

Rossana Martin:

Sure. And I think since the regions have been pretty consistent and the fact we're just going to release our 2025 Travel Market Report, are you okay with us looking ahead to 2025?

Miriam Moscovici:

Of course.

Rossana Martin:

Awesome. All right, let's start with economics and global growth. I think that's a good place to start. According to Oxford Economics in 2025, economic growth is expected to be close to the same as '24 at 2.85%. So 2024 was 2.7%. There is some uncertainty with the incoming US president and a new administration, which there typically is, and which will surely impact economics in some way including the global economy overall. So looking at that, the US will still continue to outperform other advanced economies. That's something that we do know. Over the last two years, we've grown more quickly than any other advanced economy. We expect this will continue in 2025, but to a much lesser degree. And overall, we see a higher and more volatile prices to become the norm. Alright, so let's talk about global airfare and the outlook there. Globally, we expect average ticket prices to be virtually unchanged in 2025, really rising by just 0.1%. While regional-

Chad Lemon:

Okay, that's good news, right?

Rossana Martin:

Yeah. Well, that's good news, right?

Chad Lemon:

For the traveler anyway.

Rossana Martin:

For the traveler, right, exactly. And while regional fares should rise by 0.2%, we're expecting fares for intercontinental trips to actually fall by about 0.6%. Overall economy fares are likely to be flat amid concerns about the sustainability of leisure demand, which is actually tailing off a little bit. And I can tell you while there's variation in our forecast across regions and different segments, average ticket price inflation looks strongest for business class regional travel, which will be about 2.2% globally. Now, taking a different look on the hotel front for 2025, we forecast average daily room rates or ADRs globally to rise about 2.9%. Most regions may expect to see average rate increases close to that figure. All right, so let's take a little bit of a look into Asia if that's okay, let's start there.

Miriam Moscovici:

Let's start in Asia.

Rossana Martin:

Yeah, perfect. So Asia is vital to the recovery of international travel and if we look at APAC airline yields, let's start looking at that. As they progress through the recovery cycle post-pandemic, airlines around the world have found their yields are becoming increasingly under pressure. And as airlines restore their schedules back to (and often beyond) pre-pandemic levels, they're finding it's coinciding with a softening of a leisure demand. And as they continue to look at these lower average yields, airlines are more actively seeking to attract and develop corporate business. That's good news for the buyer because it should place them in a stronger position to renegotiate certain deals. So super exciting on that front.

Across all fair classes and journeys, Southwest Pacific and Asia can expect to see the strongest increases in average ticket prices, 3% and 2.4% respectively. That will make the Southwest Pacific the strongest performing region. However, on intercontinental routes, capacity continues to plow into the market, which will drive down fares there by as much as 5%. On the hotel front, we expect to see rate inflation above the global average and Southwest Pacific again, in the core markets of Australia and New Zealand with regional average inflation of 2.9%.

And I do want to touch on a couple of additional markets. For example, India, we expect buyers can see rises in rates of 4 to 5% early on in 2025, but we expect the inflation to decrease there for the remainder of '25. And in Japan, the weak yen has made Japan a more popular destination and you couple that with numbers higher, at 10% more than pre-pandemic, its expected rates there will increase by 8%.

Miriam Moscovici:

Okay, so that's APAC. And what about across Europe and Middle East and Africa?

Rossana Martin:

All right, so for Europe, average ticket prices are expected to grow by 1.1% overall with regional economy fares having the highest increase at 1.5%, with intercontinental economy fares expected to fall by 1%. If you look at hotels across Europe, we're expecting an increase of about 2.8% overall. We're seeing pricing strength in Southern Europe with expected 6% increases in Spain, who has one of the strongest price movements in Europe just in general. We expect rate inflation to be weakest in Eastern Europe, primarily due to a 2% decrease in Russia. Again, not surprising there. But what's interesting is that large hotel chains in Greece are trying to push corporate rates up. So we see that buyers there can expect about a 3% increase there. And high occupancy and costs in Switzerland, we believe, will push hotel costs there by about 4%.

All right, so let's go into the Middle East and we'll look at average ticket prices there. We expect they will decrease across the region by 0.4% with regional business fares remaining flat and intercontinental business fares increasing by about 0.5%. So on the hotel front, the Middle East is projected to have the highest average daily rate increase by about 4.1%. And this is a result of the strength of hotel pricing in Saudi Arabia, which disguises price weakness elsewhere in the region. And rate movements are expected to be in the 0 to 2% range in most other Middle Eastern countries.

All right, let's take a look at Africa and looking there into the airfare. So overall in the region, we expect them to remain flat with the exception of regional business fares, which we expect to increase by about 1%. On the hotel front, we expect an increase of ADRs or average daily rates in Africa of 3.3% across the region. Rate hotspots include Egypt and Zambia. And this is an interesting fact where rates have been 40% higher year-over-year and Nigeria whose average daily rates have increased by 70%.

Chad Lemon:

Wow.

Rossana Martin:

I know it's crazy. And Kenya had a large drop though of 50.4% and their rates have been falling since July due to the supply outpacing demand.

Miriam Moscovici:

Okay. And what about Latin America?

Rossana Martin:

All right, so when I talk about Latin America, I want to note that Mexico is included in our North American figures.

Miriam Moscovici:

That's right.

Rossana Martin:

All right. So average ticket prices in Latin America overall are expected to reduce by about 1.5% with regional economy and intercontinental business prices falling the most. From a hotel perspective, average daily rates across the region are expected to increase by about 3.4%. At 6%, Colombia is likely to see the largest increase, building on the 4% rise we've seen so far in 2024. And as the country's economic growth picks up, demand for hotel accommodation should strengthen and Brazil's hotels can expect one of the region's highest rate increases in 2025, but at 4% this will be way below the 11% rise we've seen so far in 2024. So there's some rate stabilization there. The reigning South American markets can expect more modest, average daily rate movements of about 1 to 2%. And then in Central America, Costa Rica should see rates rise by about 2%, largely in line with what we've seen with increases so far during 2024.

Miriam Moscovici:

Okay. Now bring it all home and talk about North America.

Rossana Martin:

All right, so average ticket prices in North America are expected to decrease about 1.2% overall. It's primarily driven by lower regional and intercontinental economy prices. Regional business fares, however, are expected to rise by 3% and intercontinental business fares by about 1%. Now, shifting to the hotel side, average daily rates are expected to increase in North America by about 2.5% overall. And we believe rate inflation will be the highest in Canada with rates there expected to rise by about 3%. The US won't be too far behind, and nationally room rates should rise about 2.4%.

And looking at the Mexican market, average daily rates are rising rapidly there and this has propelled prices to be almost 50% higher than they'd been before the pandemic. Crazy number. It's hard to see double rate digit rate inflation continuing though. So we think that we'll lessen a little bit and we see rate increases maybe going up to about 1% in Mexico.

Chad Lemon:

My gosh, how you are able to just go through all of that is mind-boggling, it's insightful. I think if anyone listening to this podcast tuned into any part, that was it. You know what's going on. So of course, thank you for sharing all of that. I know you've also been part of some pretty high stakes sales meetings in the second half of this year, and I'm not going to ask you about the ins and outs of those, but I'm interested to know about the topics you're being asked about. Anything new or surprising?

Rossana Martin:

All right, before I start with that, I do want to say and give credit where credit's due with all of those stats, I have to give special thanks to our Research and Intelligence team. Without them and the content they deliver, which is mind-boggling in itself, I wouldn't be able to do it. So thank you to them. All right, so it's interesting, in addition to the typical things that we're hearing in RFPs, we're seeing a surprising shift to customers wanting truly dedicated staffing and asking about pre-trip approval. And listen, I'm all for both of them when it makes sense, but dedicated staffing, for example, it rarely makes sense in certain markets or regions like North America. Travelers can pretty much self-serve 24/7, 365, right?

Chad Lemon:

Yeah.

Rossana Martin:

So we've actually sold it a couple of times this year and we're still seeing it come up in recent bids, but we believe it can drive up costs unnecessarily. So we try to take a deep dive with each client as to the reasons for it. If it's to Band-Aid their current bad service with a TMC, it probably doesn't make sense. In that case, to be honest, they should just choose a TMC who can deliver excellent designated service, which is table stakes. And I hate to say it, but sometimes we find out it's really because their tech setup or their travel policy doesn't align or support self-service. And so, that has an effect on the service with them thinking they need a dedicated staff.

And then, shifting to pre-trip approval, many who work with me know I'm not a huge fan of it. Unless you're declining trips 30% or more of the time, you simply aren't getting a return on your investment. Most travelers we find want to do the right thing and we'll do it 100% of the time if the tools are built the right way. It's a "build it right from the beginning and they will come," mentality really. It allows you to trust your travelers and arrangers. And I think that during our discovery sessions with clients, we find out the reasons why they're asking for it, the pre-trip approval, can actually be solved by implementing the right policy, the right technology, and engaging travelers before they make the wrong decision or a bad decision. And I think it can save time, money, and grief and implementing a pre-trip approval process, which actually affects multiple people.

Miriam Moscovici:

Rossana, have these people at the meetings, have they changed this year? And by that I mean back in the day we would have meetings, would be with a travel program manager, maybe a CFO or a procurement person. Today it's different or is it? How are those conversations going? Who's at the table?

Rossana Martin:

Yeah, so it has changed. In addition to the usual stakeholders who are typically travel management, finance, HR, procurement, and executive admins who have been involved in conversations, we're actually seeing more involvement now from security risk management and Infosec way ahead of a decision, they're coming in even before RFPs are being issued. Sustainability and ESG contacts as well as focus groups that include a mix - so female travelers, road warriors, and LGBTQIA+ travelers. In addition to really weeding out that TMC pool, I view this as being a big step in the right direction, as these groups are critical to the success of any corporate travel program.

The other thing that we're seeing is the C-suite getting more involved in the final decision-making process. And for example, this is interesting and one of our recent global wins, the C-suite actually helped shape the final global SLA. So in addition to selling who they wanted to pick, we had to really negotiate that SLA with the C-suite. And that's the first time I've ever seen that level of involvement.

Miriam Moscovici:

SLA being service level agreement?

Rossana Martin:

Correct. Yes. Thank you, Miriam.

Chad Lemon:

Okay, good to know. But I assume that technology takes up a large chunk of what you talk about in customer meetings. Regardless, face-to-face or virtual, how is travel technology changing, especially as we move into 2025 and how you're approaching it with customers and prospects?

Rossana Martin:

Yeah, I think there are quite a few changes. I think some that you probably expect and maybe others that you may not. So I want to talk about something on the M&E side. So meetings and events we know are dynamic. And the fun thing about all of this is we're seeing a revolutionary shift unfolding. It's really the rise of immersive experiences. We really started doing this on the M&E side in 2023, but it's evolved. And as the demand for standout events continues to grow, our planners and designers are more frequently turning to virtual and augmented reality. So think of AI and data analytics to take in-person experiences to the next level.

And so, specifically The Collective, which is powered by BCD M&E, they have a lot of experience in this area and where we're seeing their offering grow. And a good example of this, which is interesting, is they designed a registration process for a client where attendees were invited to input a term or a phrase into this open field and an AI tool actually generated an artistic portrayal that got printed onto their badge on the spot. And the event in question was really heavily focused around emerging AI. So it was a very unique and personalized way to tie into the theme.

Chad Lemon:

Love that, yeah.

Rossana Martin:

So kind of exciting. Yeah, and I think on the corporate side, we're going to see personalized travel continue to grow. Advanced AI will enable highly customized travel experiences from flight choices to hotel recommendations based on individual preference, but also I think being able to stay in line with corporate travel policy.

Chad Lemon:

Okay, Rossana, we're about to end 2024, and you both know me, I have to get a little mushy sometimes. What or who is BCD Travel to you?

Rossana Martin:

All right, well I love the mushy. BCD to me is, look, we care about our people, which is reflected in our multiple HR-related awards. And I think it makes BCD an employer of choice, quite frankly, with the best talent in the travel industry. We're financially strong. That allows us to make targeted investments in service and technology. And I think lastly, I think of us as the premium brand and the leader in the corporate TMC space. We don't just show up for customers, we don't just go to events. We are the trusted advisor and industry thought leader. We really immerse ourselves into our client's culture and teams and become a true partner with the goal of a long-term partnership. And when we make promises to our clients, we deliver. And I believe the true testament to that is reflected in our industry leading retention rate, which is about 98% and has been consistently industry leading for the past 10 plus years.

Chad Lemon:

Miriam, is it appropriate to say that I might have a travel crush on Rossana? I mean, she's just so perfect at sorting through details and delivering information. I always love talking to her. That's no secret. And she somehow makes all of this interesting to listen to. I love having her here on the pod.

Miriam Moscovici:

I do too, and I think that's why we've got her on every quarter so we can get that update.

Chad Lemon:

Okay, everyone, we have one last episode for everyone and it's going to be a big one, so be on the lookout for our next episode. But until then, be sure to leave us a comment or review and we'll talk next time.

Outro:

Thank you for connecting with us. BCD Travel helps companies travel smart and achieve more. We drive program adoption, cost savings, and talent retention through digital experiences that simplify business travel. Learn more about the topics you heard on this episode by visiting bcdtravel.com/podcast.