Travel buyers could benefit from a potential price war between airlines flying from Europe to Asia via the Middle East, according to a new report.
Advito, which is the research arm of BCD Travel, made the prediction as part of its 2014 Industry Forecast which looks at the likely price changes for major travel components such as flights, hotels, rail, car rental and meetings.
The report expects that airlines in Europe will not be able to introduce “steep fare increases” next year due to weak demand in the region.
Advito also thinks that “excessive capacity from Gulf carriers could work to buyers’ advantage” in creating the conditions for a long-haul price war on flights from Europe to the Middle East and beyond.
“Since European carriers lack the financial resources of their Gulf competitors, they will have to make some tough decisions over “flight or fight.” For example, Lufthansa has already scaled back services to India in response to intense competition from the Gulf carriers and Turkish Airlines,” said the report.
Advito is predicting that overall European intercontinental economy and business airfares will rise by 2 per cent and 1 per cent respectively in 2014, while European short-haul airfares in both classes are set to increase by 1 per cent.
“Full-service European airlines show little interest in increasing capacity, aside from the introduction of Airbus A380s on some long-haul routes,” said the report.
“Low-cost carriers and hybrid airlines, on the other hand, will continue to expand. We expect that this expansion will restrain short-haul fare increases within Europe, and anticipate rises of not more than 1 per cent.”
The report is also forecasting “moderate increases” in average hotel rates across most major markets including a 1-3 per cent rise in the UK next year.
“Demand will continue to increase in most markets, although not as dramatically as hoteliers might anticipate. Latin America and Africa look set for the strongest rates of demand growth,” said Advito.
“Hotel companies are seeking negotiated rate rises of 4-6 per cent for 2014. One or two are being more aggressive, but generally they have set a much lower target than the 9 per cent growth they had anticipated in 2013.
“Given the uncertainty about demand recovery levels, we think hotels are still being overly ambitious.”
Advito added that it expected hotels to only be able to raise corporate rates by an average of 2-3 per cent for 2014.