As the economy continues to grow and expand, business travel costs are expected to change in 2023. The airline industry has started to recover from a decade-long slump, which has caused many companies to cut back on their travel budgets. However, airlines are starting to raise prices again, which may affect companies’ bottom lines next year.
2023 will be a year of continued strong global growth for the economy.
The global economy is expected to grow by 3.3% in 2023, slightly higher than the previous year’s growth rate of 3.2%. This is driven by strong growth in emerging markets and developing economies such as China and India, where GDP increased by 1.5% and 7%, respectively.
The World Bank predicts that the U.S. will see a modest increase in its GDP while Western Europe continues to improve slowly.
Rising interest rates will further dampen the world economy.
Interest rates have risen in the United States, the United Kingdom, and Europe. This is a global phenomenon. The U.S. Federal Reserve has raised interest rates eight times since 2015, and more rate hikes are likely on the way over the next few years, increasing borrowing costs for corporate America and consumers alike. The Bank of England has hiked its benchmark rate four times since 2016 and may do so again this year if inflation continues to rise above 2%. European Central Bank (ECB) officials have indicated that they will soon begin tapering their asset purchases program from €30 billion per month down to €15 billion starting in September 2020 (a quarter earlier than previously expected). These central bank policies are leading to higher costs for businesses and potentially dampening economic growth in general.
The rise in business travel costs
It comes at a time when many nations want to develop their tourism industry.
Travel is a major part of the economy in many countries, with tourism being one of the largest industries in the world. It contributes more than 10% of global GDP—and that’s just direct spending on travel and accommodations. Considering all its indirect repercussions, like air transport jobs or consumer goods purchased by tourists, this number jumps even higher.
Tourism has also become a cornerstone for economic growth in some parts of the world:
- In 2030 alone, China expects tourism revenues to reach $1 trillion.
- Indonesia aims for $50 billion by 2025.
- Singapore predicts an increase from $22 billion to $43 billion by 2023.
- Kenya hopes its share will double over the next five years from around $900 million in 2017.
Travel costs have increased since 2010, but the increase has not been uniform globally
Although it’s difficult to quantify the exact impact of travel costs on a business, many factors influence them. By understanding these factors, you can better plan your travel budget and avoid overspending.
Business travel costs have increased since 2010, but the increase has not been uniform globally. Airfares have generally increased in most countries, although some countries have seen more significant increases.
The increase in airfares
In 2023, we expect airfares to begin rising in Russia, Australia, and Brazil. The US, Canada, and China have all seen an increase in airfares since 2017, but other countries such as Russia, Australia, and Brazil have not seen such increases yet. The reason is that interest rates have not increased yet in those countries like they did in the U.S., so airlines do not need to raise ticket prices until they see higher costs of doing business (i.e., rising interest rates).
Business travelers are facing many challenges in this new era of travel.
In this day and age, business travelers are facing more challenges than ever before. Costs are increasing, and competition for the best deals is fierce. There are also increased travel restrictions for those working in certain industries, increased security concerns, and the importance of using a travel agent or app.
We have compiled a list of some tips we think will help you navigate through these turbulent times:
The rise in business travel costs is not good news for business travelers. As we have seen, it is a global issue, but it has been most pronounced in countries such as the US, Canada, and China. The rise in airfares comes when many nations want to develop their tourism industry. In this regard, rising prices for flights could be an opportunity for entrepreneurs to fill the gap left by traditional airlines that no longer serve certain destinations due to higher costs or less demand from customers.