Spending on business travel could remain strong, despite the very real threat of a global recession.
This is according to HSBC chief economist of Australia, New Zealand
and global commodities, Paul Bloxham, who addressed an in-person and
virtual audience at Flight Centre Corporate’s recent Illuminate event in
Bloxham said the world was going to have a global economic slowdown
in 2023 and that this was already happening in some parts of the world.
With inflation in the US of around 8.5%, Europe 10%, Australia about
7.5%, and Asia starting to feel the impact of western households
reducing their spend on manufactured goods, as well as the higher cost
of living expenses, most analysts are predicting an economic global
downturn, if not a global recession.
Bloxham said the supply of manufactured goods had failed to keep up
with demand during the pandemic and that consecutive interest rate rises
in many countries was now resulting in people spending less. But the
good news for the travel sector, he said, is that there are high levels
of pent-up demand.
“A lot of people were saving money during the pandemic and now they
are wanting to spend this on experiences, particularly travel,” he said.
“They are no longer spending on a new television or computer but on
Bloxham added that while this was positive news for airlines and
hotels, those involved in meetings and events could be forced to reduce
or slow their spend, particularly those based in Europe, with consumers
and businesses impacted by the ongoing war in Ukraine and significantly
higher energy prices.
“The economy is going to slow down [but] my sense is that some
[money] will still get allocated to travel,” he said. “The local story
[in Australia and Asia] is the consumer base hasn’t done much and they
want to travel.”
He added that the high USD could also be a positive for Australia and
Asia and could result in more travellers coming to these regions from
APAC general manager of FCM Consulting, Felicity Burke, also speaking
at the event, said that by the end of Q4 2022, there will be 15% less
available airline seats globally than there were in 2019. Less seats,
combined with higher fuel prices for airlines, will result in higher
priced tickets. Burke added that hotel room rates are also expected to
rise globally in 2023.
One potential counter to these higher prices could be a greater use
of technology within hotels, according to Andrew Gallard, general
manager corporate of FCTG Global Land Supply Division, who also spoke at
He said hotels are already adopting automated services, which could
help reduce costs, and there was the real possibility that this will
grow in coming years.
“QR codes on menus, digital checkouts accessible on television
screens, room service ordering on TVs – the opportunity for change is
happening,” he said. “It will come down to customer choice and whether
they want a completely touch-free experience.”