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State of the Industry and Industry Forecast CWBTA Mark Williams November 8 , 2011

State of the Industry and Industry Forecast CWBTA Mark Williams November 8 , 2011. State-of-the-Industry Overview. Setting. Airline. Hotel. Meetings. Ground Transportation. Risk Factors. Economy . Oil price . Security/safety . Global Economic Outlook. 2010: +5.1% ◄ 2011: +4.3% ◄

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State of the Industry and Industry Forecast CWBTA Mark Williams November 8 , 2011

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  1. State of the Industry and Industry ForecastCWBTAMark WilliamsNovember 8, 2011

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

  3. Risk Factors Economy Oil price Security/safety

  4. Global Economic Outlook 2010: +5.1% ◄ 2011: +4.3% ◄ 2012: +4.5% 2010: +1.8%◄ 2011: +2.0%◄ 2012: +1.7% 2010:+2.9%◄ 2011: +2.5%◄ 2012: +2.7% 2010: +10.3%◄ 2011: +9.6% 2012: +9.5% 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, June 2011

  5. 2012 Outlook Demand is close to 2008 pre-recession levels and will continue to grow in 2012, barring negative economic developments Overcapacity in some markets and a weakening in economic confidence will keep airfare increases to 3-5% increase globally Meeting rates will rise faster in 2012 and accelerate in 2013 Global hotel rates increases are projected at 2-6%, based on higher demand and hotels’ push for higher rates After two years of little change, rental carrates may rise 4-6% Source: Advito 2012 Industry Forecast, Sept. 2011

  6. Air Outlook 2012 Fare increases of 3-5% will beless drasticthan in 2011, when oil price prompted significant fuel surcharges Barring sharp economic decline or oil price surges, demand shouldcontinue to grow Capacity cuts anticipated for Q4 2011 are likely to be sustained into 2012, butover-supplymay remain in some regions Additionalfactorsthreatening to push up total ticket prices include consolidated airline entities, distribution/card payment fees and EU Emissions Trading System Source: Advito 2012 Industry Forecast, Sept. 2011

  7. Airfare Predictions for 2012North America Rising demand and supplier capacity discipline will result in YOY increases in airfares Forecast of average development of air fares used by corporate clients 2012 against 2011 (in USD) Source: Advito 2012 Industry Forecast, Sept. 2011

  8. Airfare Predictions for 2012Latin America Following similar trends and capacity/demand balance, Latin American air costs will also increase Forecast of average development of air fares used by corporate clients 2012 against 2011 (in $ USD) Source: Advito 2012 Industry Forecast, Sept. 2011

  9. Airfare Predictions for 2012Europe Sluggish home economies have led to softening regional demand but airfares are still expected to increase Forecast of average development of air fares used by corporate clients 2012 against 2011 (in € EUR) Source: Advito 2012 Industry Forecast, Sept. 2011

  10. Airfare Predictions for 2012Middle East Large capacity increases by Middle East carriers will temper ability to raise fares even with higher demand Forecast of average development of air fares used by corporate clients 2012 against 2011 (in € EUR) Source: Advito 2012 Industry Forecast, Sept. 2011

  11. Airfare Predictions for 2012Asia-Pacific Demand is increasing rapidly with the strength of  the region’s economic rebound Forecast of average development of air fares used by corporate clients 2012 against 2011 (in $ USD) Source: Advito 2012 Industry Forecast, Sept. 2011

  12. Advance Booking Bookings made more than 14 days in advance remain at about 50% share of a fluctuating behavior pattern North America Source: Advito 2012 Industry Forecast, August 2011

  13. 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 challenge 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

  14. 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$105/barrel in 2012 With a sharp rise in oil, Substantial increase in total ticket prices may prompt fall in corporate demand Source: Advito 2012 Industry Forecast, Sept. 2011

  15. Spotlight: Ancillary FeesThe Issues Total price Visibility Leverage

  16. 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 policy on 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

  17. 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

  18. 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 How much the ETS will cost airlines? How much of that cost they will pass on to passengers? How they will pass it on? Spotlight – EU Emissions Trading System Source: Advito 2012 Industry Forecast, Sept. 2011

  19. Hotel Outlook 2012 Demand will continue to rise, though at alower ratethan 2011 More chains willdemandheavy rate increases in opening 2012 negotiations New capacity will belimited in N. America and Europe butsignificant in Asia-Pacific Rates will rise 2- 6% percent in general, but with another double-digit jump in markets likeNew York Source: Advito 2012 Industry Forecast, Sept. 2011

  20. Hotel ADR: 2012 Forecast by Region Steadily increasing demand will usher in moderate ADR increases Europe +2-3% North America +5-6% Middle East +6-7% Asia-Pacific +6-7% Africa +3-4% Latin America +5-6% Forecast of average development of hotel rates used by corporate clients in 2012 against 2011 (local currency) Source: Advito 2012 Industry Forecast, Sept. 2011

  21. 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 +2-4% IN +4-6% MX +1-3% AE +2-4% SG +2-4% BR +4-6% AU +2-4% ZA +2-4% AR +5-7% Forecast of average development of hotel rates used by corporate clients in 2012 against 2011 (local currency) Source: Advito 2012 Industry Forecast, Sept. 2011

  22. Spotlight – London Olympics (July 27- Aug.12, 2012) Hotels may ask 5-10x their normal rate Demand will skyrocket • Take action now • Block space in advance • Look at extended-stay properties as an alternative • Consider locations outside London, up to an hour away by train, such as Reading, Oxford or Cambridge • Be aware of the impact that the Olympics will also have on air supply to and from London • Review the situation at the start of 2012

  23. Recommendations for Buyers – Hotel Be wary of dynamic pricing, and be sure to negotiate more than 10 percent off the BAR with dynamic pricing Expand number of hotels in RFP process but concentrate on fewer properties in final decision, except in large, high demand markets 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 ndustry Forecast, Sept. 2011

  24. 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

  25. 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 expect to find upscale hotel bargains any more Watch out for suppliers being less flexible in negotiating terms and conditions Be more prepared to consider second- and third-tier cities. Source: Advito 2012 Industry Forecast, Sept. 2011

  26. 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

  27. 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

  28. 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

  29. 2012 Outlook – Rail Expect price increases of 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

  30. Thank You!

  31. Cost per Mile: Asia Pacific Source: Advito 2012 Industry Forecast, August 2011

  32. Cost per Mile: Europe Source: Advito 2012 Industry Forecast, August 2011

  33. Cost per Mile: Middle East Source: Advito 2012 Industry Forecast, August 2011

  34. Cost per Mile: Latin America Source: Advito 2012 Industry Forecast, August 2011

  35. Cost per Mile: North America Source: Advito 2012 Industry Forecast, August 2011

  36. Economy Class Ratio The use of economy class has increased on regional flights in North America and Europe North America Europe Source: Advito 2012 Industry Forecast, August 2011

  37. Hotel Rate Developments: United Kingdom Source: Advito 2012 Industry Forecast, August 2011

  38. Hotel Rate Developments: United Arab Emirates Source: Advito 2012 Industry Forecast, August 2011

  39. Hotel Rate Developments: Singapore Source: Advito 2012 Industry Forecast, August 2011

  40. Hotel Rate Developments: Russia Source: Advito 2012 Industry Forecast, August 2011

  41. Hotel Rate Developments: Mexico Source: Advito 2012 Industry Forecast, August 2011

  42. Hotel Rate Developments: United States Source: Advito 2012 Industry Forecast, August 2011

  43. Hotel Rate Developments: Korea Source: Advito 2012 Industry Forecast, August 2011

  44. Hotel Rate Developments: Japan Source: Advito 2012 Industry Forecast, August 2011

  45. Hotel Rate Developments: Italy Source: Advito 2012 Industry Forecast, August 2011

  46. Hotel Rate Developments: Ireland Source: Advito 2012 Industry Forecast, August 2011

  47. Hotel Rate Developments: India Source: Advito 2012 Industry Forecast, August 2011

  48. Hotel Rate Developments: Germany Source: Advito 2012 Industry Forecast, August 2011

  49. Hotel Rate Developments: France Source: Advito 2012 Industry Forecast, August 2011

  50. Hotel Rate Developments: China Source: Advito 2012 Industry Forecast, August 2011

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