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State of the Industry San Diego Business Travel Association Michele Cardella February 23, 2012 video

State of the Industry San Diego Business Travel Association Michele Cardella February 23, 2012 video. State-of-the-Industry Overview. Setting. Airline. Hotel. Meetings. Ground Transportation. Risk Factors. Economy . Oil price . Security/safety . 2010: + 5.2% ◄ 2011: + 3 .8% ◄

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State of the Industry San Diego Business Travel Association Michele Cardella February 23, 2012 video

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  1. State of the IndustrySan Diego Business Travel AssociationMichele CardellaFebruary 23, 2012 video

  2. State-of-the-Industry Overview Setting Airline Hotel Meetings Ground Transportation

  3. Risk Factors Economy Oil price Security/safety

  4. 2010: +5.2% ◄ 2011: +3.8% ◄ 2012: +3.3% ◄ 2010: +1.9%◄ 2011: +1.6% 2012: - 0.5%◄ 2010: +3.0%◄ 2011: +1.8%◄ 2012: +1.8%◄ 2010: +10.4%◄ 2011: +9.2% ◄ 2012: +8.2% ◄ Global Economic Outlook The recovery is expected to slow down in 2012 in most regions, including China, and will decline in the eurozone Euro Area China USA GDP ◄ indicates revision to previous forecast World Source: IMF, World Economic Outlook, Jan. 2012

  5. Eurozone Crisis So far there is no solution to Greek debt, and future bailouts remain open questions Eurozone breakup averted - at least for the moment France’scredit rating has been downgraded, joining Austria, Malta, Slovenia, Slovakia, Cyprus, Italy, Portugal and Spain Belgiumhas entered another recession Source: Advito 2012 Industry Forecast Update, Feb. 2012

  6. 2012 Outlook Strong demand in Latin America and Asia is pushing airfare increases higher in these regions (up to 9% YOY) than in others (average 3% YOY) Demand is relatively robust and will continue to grow in 2012, barring negative economic developments Meeting rates will rise faster in 2012 and accelerate in 2013 A range of capacity conditions means hotel rate hikes will vary across the globe, from 1-20% After two years of little change, rental carrates may rise 4-6% Source: Advito2012 Industry Forecast Update, Feb. 2012

  7. Air Outlook 2012 Airfare forecast for Europeis reduced from a YOY increase of 5% down to 3% Major airlines are cutting capacity after an estimated 2% YOY decline in 4Q2011 The projected YOY increase for Latin America has risen to 7% for intercontinental and 8%for regional travel High demand for regional economy-class travel in Asiahas bumped the forecast increase up to 9% Source: Advito 2012 Industry Forecast Update, Feb. 2012

  8. Airfare Predictions for 2012North America Rising demand and supplier capacity discipline will result in YOY increases in airfares ◄ indicates revision to previous forecast Forecast of average development of air fares used by corporate clients 2012 against 2011 (in USD) Source: Advito2012 Industry Forecast Update, Feb. 2012

  9. Airfare Predictions for 2012Latin America Following similar trends and capacity/demand balance, Latin American air costs will also increase ◄ indicates revision to previous forecast Forecast of average development of air fares used by corporate clients 2012 against 2011 (in $ USD) Source: Advito2012 Industry Forecast Update, Feb. 2012

  10. Airfare Predictions for 2012Europe Ongoing concern for Europe’s economy has led Advito to revise downward its forecast for YOY fare increases ◄ indicates revision to previous forecast Forecast of average development of air fares used by corporate clients 2012 against 2011 (in € EUR) Source: Advito2012 Industry Forecast Update, Feb. 2012

  11. Airfare Predictions for 2012Middle East Large capacity increases by Middle East carriers will temper ability to raise fares even with higher demand ◄ indicates revision to previous forecast Forecast of average development of air fares used by corporate clients 2012 against 2011 (in € EUR) Source: Advito2012 Industry Forecast Update, Feb. 2012

  12. Airfare Predictions for 2012Asia-Pacific Demand is increasing rapidly with the strength of  the region’s economic rebound ◄ indicates revision to previous forecast Forecast of average development of air fares used by corporate clients 2012 against 2011 (in $ USD) Source: Advito2012 Industry Forecast Update, Feb. 2012

  13. Advance Booking Bookings made more than 14 days in advance remain at about 50% share of a fluctuating behavior pattern North America Source: Advito2012 Industry Forecast Update, Feb. 2012

  14. Recommendations for Buyers – Air Be wary of significant over-commitment to volume or market-share targets during negotiations Negotiate hard on the pockets of over-capacity in the market Joint ventures and other airline consolidations will pose an increasing threat to managed air programs A reliable way to reduce average ticket price is to find ways to avoid last-minute purchases Source: Advito 2012 Industry Forecast, Sept. 2011

  15. Spotlight: Oil Prices Fears of economic slowdown have moderated skyrocketing oil prices Every US$10 rise in barrel price pushes up total ticket price by approximately 3% (higher fares and fuel surcharges) IMF forecasts US$99.09/barrel in 2012 Source: Advito 2012 Industry Forecast Update, Feb. 2012

  16. Spotlight: Ancillary FeesThe Issues Total price Visibility Leverage

  17. Spotlight: Ancillary FeesThe Trends Airlines collected $21.46bn in ancillary fee revenue in 2010 – an increase of 59% YOY and 775% over 2007 Expect airlines to continue experimenting with different forms of unbundling and merchandising Our recommendations to clients Continue to create policyon unbundled services, including specifying which can be reimbursed and which cannot Press suppliers to provide adequate reporting Try to negotiate on rebundled packages as part of corporate agreements Source: Advito 2012 Industry Forecast, Sept. 2011

  18. Spotlight – Europe Card Payment Fees • In 2011, BA and Lufthansa Group announced fees for credit card payments • What should clients be doing? • Prepare for other airlines to follow suit/expand similar fee systems • Make the fees a topic for negotiation in upcoming deals • Evaluate payment options Source: Advito 2012 Industry Forecast, Sept. 2011

  19. Spotlight – EU Emissions Trading System • How much the ETS will cost airlines? • How much of that cost they will pass on to passengers? • How they will pass it on? • EU will include all airlines in ETS as of Jan. 1, 2012 • ETS sets a cap on permissible emissions; beyond that cap, companies must buy permits • Non-European airlines are fighting hard against being included in the ETS Source: Advito 2012 Industry Forecast, Sept. 2011

  20. Hotel Outlook 2012 India’s forecasted ADR increases are slowing to 2-4% due to growing capacity Strong demand in Asia, LatinAmerica and the MiddleEast is driving a 3% YOY jump in ADR Brazilwill see double-digit YOY ADR growthat 18-20% In Israel and Saudi Arabia demand isoutstripping capacity, leading to 10-15% rise in ADR Source: Advito2012 Industry Forecast Update, Feb. 2012

  21. Hotel ADR: 2012 Forecast by Region Steadily increasing demand will usher in moderate ADR increases Europe +2-3% North America +5-6% Middle East +7-15%◄ Asia-Pacific +8-10%◄ ◄ indicates revision to previous forecast Africa +3-4% Latin America +8-18%◄ Forecast of average development of hotel rates used by corporate clients in 2012 against 2011 (local currency) Source: Advito2012 Industry Forecast Update, Feb. 2012

  22. Hotel ADR: 2012 Forecast by Market Moderate increases are expected due to continuing though moderated economic growth tempered by new supply DK-FI-NO +2-4% RU +3-5% CA +4-6% CH-PT-SE +0-2% ES-IE-IT +1-3% NL-TR-UK +1-3% AT-BE-CZ +2-4% FR-DE +2-4% JP +0-2% US +5-6% KO +3-5% CN +4-6% SA +13-15%◄ MX +1-3% IN +2-4%◄ AE +2-4% SG +8-10%◄ ◄ indicates revision to previous forecast BR +18-20%◄ AU +7-9%◄ ZA +2-4% AR +8-10%◄ Forecast of average development of hotel rates used by corporate clients in 2012 against 2011 (local currency) Source: Advito2012 Industry Forecast Update, Feb. 2012

  23. Spotlight – London Olympics (July 27- Aug.12, 2012) Hotels may ask 5-10x their normal rate Demand will skyrocket • February 2012 Update • 20 percent of rooms to be released back into the market • 120,000+room nights • 200 hotels (5-star to budget)

  24. Recommendations for Buyers – Hotel Be wary of dynamic pricing, and be sure to negotiate more than 10 percent off the BAR Expand number of hotels in RFP process but concentrate on fewer properties in final decision Insist on negotiated rate being an LRA rate Negotiate hotel contracts for transient travelers to cover small meetings (up to 50 room nights) Consider imposing city caps based on total cost of stay Source: Advito 2012 Industry Forecast, Sept. 2011

  25. 2012 Outlook – Meetings Rates for meetings will rise faster in 2012 than in 2011 and accelerate even more sharply in 2013 Demand will continue to grow worldwide, approaching peak 2008 levels by year-end 2012 Rates are expected to return to 2008 levels in 2013/2014 Lead-times may start to lengthen as supply at preferred hotels dwindles Source: Advito 2012 Industry Forecast, Sept. 2011

  26. Recommendations for Buyers – Meetings With the negotiating environment likely to be even tougher in 12 months’ time, consider the option of multi-year deals with suppliers Book ahead, especially in high-demand cities Do not rely on finding upscale hotel bargains Watch out for suppliers being less flexible in negotiating terms and conditions Be more prepared to consider second- and third-tier cities. Source: Advito2012 Industry Forecast, Sept. 2011

  27. 2012 Outlook – Car Rental Demand will continue to rise steadily, and providers will keep inventory tightly aligned Rateincreases will be minor (4-6%) thanks to strong competition, but total cost of rental will continue to climb (ancillary charges, taxes, insurance, fuel) Source: Advito 2012 Industry Forecast, Sept. 2011

  28. Spotlight – Car Sharing Corporate interest is likely to grow in 2012 Good for less-than-a-day rentals Administrative processing provides good management information Environmentally friendly aspect–better vehicle utilization and introduction of electric cars Companies which need car rentals in major cities should evaluate the market Analyze your existing rental program in more detail Source: Advito 20112 Industry Forecast, Sept. 2011

  29. Recommendations for Buyers – Car Rental Negotiate harder on ancillaries and other charges, such as refueling premiums Book further in advance Revisit car rental program before suppliers start to push up their rates Evaluate relative financial costs of private vehicle use vs. car rental Set a policy on ancillary items (e.g., satellite navigation systems) Source: Advito 2012 Industry Forecast, Sept. 2011

  30. 2012 Outlook – Rail Expect price increasesof 4-5%, on a par with 2011 Europe French national operator SNCF could lose market share as they beginmajor network renovations Distribution of international rail will remain challenging Japan Demand and price are provisionally forecast to be flat in 2012, although that could change with the introduction of several planned new domestic LCCs Source: Advito 2012 Industry Forecast, Sept. 2011

  31. Advito Links • Industry Forecast: updated quarterly • Changing the DNA of Managed Travel • Using Social and Mobile to Enhance Productivity, Morale and the Bottom Line • Strategic Travel Program KPI's White Paper • Improving travel program management through strategic KPIs and meaningful savings measurement • Coming soon… • Beyond End-to-End • How Consumerization is Redrawing the Blueprint for Corporate Travel Management

  32. Thank You!

  33. Cost per Mile: Asia Pacific Source: Advito 2012 Industry Forecast Update, February 2012

  34. Cost per Mile: Europe Source: Advito2012 Industry Forecast Update, Feb. 2012

  35. Cost per Mile: Middle East Source: Advito2012 Industry Forecast Update, Feb. 2012

  36. Cost per Mile: Latin America Source: Advito2012 Industry Forecast Update, Feb. 2012

  37. Cost per Mile: North America Source: Advito2012 Industry Forecast Update, Feb. 2012

  38. Economy Class Ratio The use of economy class has increased on regional flights in North America and Europe North America Europe Source: Advito2012 Industry Forecast Update, Feb. 2012

  39. Hotel Rate Developments: United Kingdom Source: Advito2012 Industry Forecast Update, Feb. 2012

  40. Hotel Rate Developments: United Arab Emirates Source: Advito2012 Industry Forecast Update, Feb. 2012

  41. Hotel Rate Developments: Singapore Source: Advito2012 Industry Forecast Update, Feb. 2012

  42. Hotel Rate Developments: Russia Source: Advito2012 Industry Forecast Update, Feb. 2012

  43. Hotel Rate Developments: United States Source: Advito2012 Industry Forecast Update, Feb. 2012

  44. Hotel Rate Developments: Korea Source: Advito2012 Industry Forecast Update, Feb. 2012

  45. Hotel Rate Developments: Japan Source: Advito2012 Industry Forecast Update, Feb. 2012

  46. Hotel Rate Developments: Italy Source: Advito2012 Industry Forecast Update, Feb. 2012

  47. Hotel Rate Developments: Ireland Source: Advito2012 Industry Forecast Update, Feb. 2012

  48. Hotel Rate Developments: India Source: Advito2012 Industry Forecast Update, Feb. 2012

  49. Hotel Rate Developments: Germany Source: Advito2012 Industry Forecast Update, Feb. 2012

  50. Hotel Rate Developments: France Source: Advito2012 Industry Forecast Update, Feb. 2012

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