Tourism sector struggling as business travel thrives
Thursday, December 20, 2012
Determining how the global financial markets are likely to change in 2013 is a serious challenge for even the most experienced economist. While some experts remain optimistic about growth of the global economy moving into the new year, others remain skeptical of whether things will improve. However, many regions around the world report that, while tourism markets across the globe stagnate, business travel appears to be thriving.
Tipping the balance
BizCommunity reports that South Africa is experiencing a boom in the business travel sector. However, the tourism industry continues to struggle in light of continued economic uncertainty in Europe and North America.
Experts in South Africa attribute much of the growth in the business travel sector to heightened interest in the events, conferences and meetings space. Cities such as Cape Town and Johannesburg have seen increased bookings in the corporate gatherings market, which has subsequently spurred business travel to the region. The initial reports could be seen as welcome news to real estate developers seeking to build serviced apartment and corporate housing complexes in emerging markets.
Marthinus van Schalkwyk, South Africa's tourism minister, recently said that more than 200 international conferences had already been scheduled to take place in cities across the country during the next five years. These events will host more than 300,000 delegates from around the world, contributing approximately $1.8 billion to the nation's economy.
Despite optimism that the conferences market will continue to boost business travel to South Africa, lingering concerns remain over the general executive travel sector. As with many countries around the world, South Africa has seen decreased spending by corporate travelers as organizations seek to minimize costs while maximizing return on investment. This, in turn, could fuel demand for furnished extended stay housing units as executives seek more cost-effective alternatives to corporate suites in chain hotels.
Marginal growth anticipated
While South Africa is currently enjoying the benefits of heightened interest in the business travel sector, other countries predict a period of much slower growth in the coming year.
TTG Asia reports that, according to Advito, the independent consulting unit of BCD Travel, growth in the business travel sector could stagnate in 2013. Analysts predict that demand for executive travel services in the hospitality and aviation industries will remain steady, but that lasting economic pressure will reduce the profitability of service providers in regions such as Asia-Pacific.
Low-cost carriers and increasing competition from Middle Eastern airlines pose the greatest threat to airlines through the Asia-Pacific region, but the overall number of flights expected to be taken by business travelers is expected to grow. However, executives may take comfort from Advito's predictions that airfare is likely to remain largely unchanged next year due to stabilization in the cost of jet fuel and strong demand relative to supply.
In the hospitality sector, demand for serviced apartments and corporate accommodations could grow substantially, as Advito believes the fiercest competition will be over rates between chain hotels and corporate clients.
Overnight rates of corporate suites are likely to increase next year, though perhaps not by as much as property managers would like. Limited supply and heightened demand could be seen as positive indicators for hoteliers, but even a predicted rate hike of between 5 and 7 percent could still drive interest in cost-effective alternatives such as corporate lodging as the year progresses.
It would seem that 2013 still holds a lot of surprises for both executives and travel management professionals, and the need to secure suitable accommodations at reasonable rates is likely to become even more important in the coming years.