Corporate Travel: The Rising Costs of Airfare, Lodging and Rental Cars
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Corporate Travel: The Rising Costs of Airfare, Lodging and Rental Cars

Woman's headshot with blurred background By Denise Oemig September 7, 2022

Categories: Location Services Mobile Workforce

With four months left, it’s easy to look at the year’s many challenges. Home and gas prices have soared across the country. Inflation is now at a 40-year high, and everything from transportation to consumer goods have increased substantially. Throw in supply chain issues and we have a perfect storm! How have these increased costs impacted travel and lodging? And what impact does this have on corporate travel?

Rising Airfare Costs

Airfare costs have experienced record highs as the cost of gas, supply and demand, staffing shortages and decreases in routes came to a head. If there is any silver lining, the Consumer Price Index said prices dropped in July. The July decrease in airfare may have come as a welcome relief to end-of-summer travelers as they wrapped up vacations or for the business traveler, starting to get back on the road to meet with clients they have not seen since the beginning of the pandemic. The drop came after airfare prices spiked by 18% in April of this year, which was the largest recorded increase since the Bureau of Labor Statistics started tracking costs in 1963.

Even with this recent decline in prices, travelers should not expect any amazing deals yet, as prices were still 27.7% higher than they were in July of 2021 as the Consumer Price index noted. The average cost of a domestic flight was still over $500 versus approximately $350 in 2021. If we factor in 2020, where the average domestic flight was hovering around $300, the July 2022 price decrease still saw airfares 40% higher than in 2020. Now, we may see some deals in the fall and early winter, but that may just be part of the seasonality of the market.

Rising Lodging Costs

When it comes to lodging, July also saw some price relief on hotel rooms. However, this is not expected to last long. In late June, U.S. hotel prices averaged $185 per night, which was down from $199 in mid-June, according to the travel booking app Hopper Pricing Tracker. Even with this decline, prices were still 16% higher than they were in June of 2021. It is expected that rates will increase in September and October to an average of $217 per night, which is far above the 2021 fall average of $148 per night.

According to Andrew Heritage, senior economist at Hopper, “Hotels typically follow a regular seasonal pattern where nightly rates would also drop in the fall, but we’re not seeing that for this year… we are seeing higher rates than we have typically seen in the past.”

Rental Cars

Historically, lodging and airfare have been a traveler’s biggest expense. Now, more than ever, rental cars are turning out to be a larger piece of the travel budget pie. The rental car companies reduced their fleet sizes significantly after COVID diminished demand. They have not resumed to the same previous fleet sizes but have been faced with a rapid increase in demand this year.

When comparing July 2022 to July of 2019, rental cars are up a whopping 48%! Since July 2022, prices have dipped slightly, but they remain well above pre-pandemic pricing. Currently, car rentals are averaging $80 per day. This is a serious increase from 2020 when rates were typically $45-$50 per day. The demand for car rentals will likely decrease in the fall, but likely rebound for holiday travel.

What does this mean for companies?

As we continue to experience inflation, labor shortages and high gas prices with the risk of recession around the corner, it is hard to truly predict where prices will go from here. However, according to the 2023 Global Business Travel Forecast, there is a sense that prices will increase over the next 18 months. Whether travel prices level out or increase, we do know that we have entered a new, pricier era of corporate travel. It’s created a challenge for those trying to estimate travel costs for their companies.

Changes to Corporate Travel

Given current and expected costs for corporate travel, along with the ongoing “duty of care” concerns for travelers, organizations must understand travel costs prior to employees booking trips. This ensures the trip is worth the cost and plans adequately consider traveler safety in each location. Many organizations have implemented a simple “pre-trip approval process” as a first step in meeting these goals. Others, especially multinational organizations, have implemented sophisticated real-time systems to track and care for travelers.

How can Motus help?

Whatever makes sense for your organization, information is key. That’s where Motus can help. With our travel costs offering, companies can budget accurately and customize travel policies. Corporate travel often gets caught up in the approval process. With Motus Travel Costs, submitting and approving pre-trip requests is easy. Interested in reducing administration and controlling costs? Learn more about Motus Travel Costs.

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