DEUTSCHE BANK’S World Outlook report predicts global growth of just 3.2 per cent in 2013 “due to stalled recoveries in the US and Japan as well as planned American tax increases and spending cuts”. The bank’s chief economist, Peter Hooper, says: “The outlook for the world economy has deteriorated. While new policy stimulus from the ECB [European Central Bank] and US Federal Reserve has underpinned equity and commodity prices... disappointing recoveries in the United States and Japan have left us little choice but to reduce our forecasts for global growth.” The bank’s figures are lower than its previous forecasts. “Our forecast downgrade is mainly due to a much slower than expected recovery in the US,” says the bank. “We now see US growth of just over 2 per cent [for 2013].”
On this side of the Atlantic, Andrew
Roberts, head of European rates strategy at RBS, believes the eurozone is “in semi-permanent recession, driven by the crisis in the periphery and, with negative growth, that is likely to continue throughout 2013”.
The ECB’s promise to help countries has
calmed the market but problems remain. “Spanish deficits continue to rise – the European Commission just raised their deficit forecast to 8 per cent for Spain – and growth expectations remain very weak, which is a dangerous phenomenon for the periphery,” says Roberts. He believes the upcoming September elections in Germany have given Greece a little more breathing space, although the country may re-emerge as a concern in 2014.
THE BUYER VIEW
CAROLINE STRACHAN, global head of travel at Astra Zeneca, says 2013 will be a year for buyers thinking about how to move to the next level in sophisticated travel management. She says: “Many travel programmes have reached a level of maturity, so I think you’ll hear the question: ‘So what next?’ This will drive new innovation, create open dialogue between buyers and suppliers, and could also positively disrupt the traditional ways of managing travel.”
Despite economic uncertainty, a recent survey of 178 European travel buyers conducted by the Business Travel Show found that 37 per cent of respondents believed their travel budgets would be higher in 2013 than the previous year, compared with 19 per cent who believed they would be smaller. The survey also revealed that 47 per cent of buyers are expecting to have to arrange more trips in 2013 than 2012.
THE SECTOR VIEW
HOTEL PRICES look set to level off in 2013, according to analysts in the sector at PWC (Pricewaterhouse Coopers). In London, the company says revenue per room has grown by 25 per cent since 2009, helped by one- off events such as the Olympics, but also revealing a fundamental strength. “London’s status as one of the leading global cities means it can attract people from all around the world, including those from emerging markets whose economies continue to prosper,” PWC says. It adds that new hotel supply during 2012 and 2013 is
likely to bring down occupancy but these temporary factors are not expected to hold London back for long.
Outside London, the picture is different.
“Here demand is more dependent on the domestic economy, which has been squeezed by high inflation and the aftermath of the financial crisis,” says PWC. “Revenue per room is still 10 per cent below its 2007 level. Despite near 70 per cent occupancy rates, hoteliers have been unable to pass price increases through the market. We expect revenue per room and rates to
remain broadly flat in 2013, as they have since 2009.”
The International Air Transport
Association (IATA), meanwhile, sees 2013 being more profitable than 2012, largely due to the recent fall in oil prices and a prediction that they will stay low. IATA’s forecast is for the world’s airlines to collectively make a profit of US$7.5 billion in 2013; the largest proportion of this will come from Asia- Pacific, with European carriers continuing to make losses. The fares paid by travel buyers are likely to mirror these profit levels.
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Mette Christensen, global head of travel for Danish shipping conglomerate AP Moller-Maersk, says buyers need to think more strategically in 2013 when it comes to hotels. “Do not jump between different chains just because someone offers you a discount. Concentrate on the destinations where you have sufficient volumes, sign a best available rate agreement for the rest, and/or buy on your travel management company’s [TMC] corporate rates,” she says.
“There is a perceived willingness by the German government to give Greece money now to avoid a major financial accident in front of the elections.” Roberts expects “modest but positive
growth” for the UK, which is sandwiched between a better performing US and the weak eurozone, yet remains a global safe haven for capital. “The UK is more than halfway through its public sector job losses, which will surprise many, and real wages are set to rise for the first time in three years thanks to inflation being more under control,” he says. “The Bank of England’s funding-for-lending scheme should start to show results with increased lending, but households will be de-leveraging until 2019 on our numbers, so don’t get too excited about the economy.”