CWT Solutions Group, the consulting division of Carlson Wagonlit Travel, and CAPA – Centre for Aviation have found that airfares on key domestic and international business routes from Melbourne have been rising sharply. Fares between Melbourne and destinations such as Sydney, Perth, Singapore and New York were up more than 5% year-on-year in the first quarter of 2018.
This despite the fact that Melbourne airport saw a strong increase in capacity in 2017, with seat numbers rising 4% last year. Passenger numbers also grew in 2017, but did not keep up with the increasing capacity.
These findings are published in the latest Business Travel Pulse report, which focuses on the Australian city of Melbourne. The report brings together key aviation and hotel data from both organizations to deliver informed opinions and in-depth analysis.
Capacity growth seems to be slowing down in 2018, and could turn out to be the lowest year for seat increases since 2013. As a result, airfares are expected to rise further this year.
“While capacity growth for Melbourne is slowing in 2018, CAPA is still seeing a focus being made on Australia’s second largest aviation market,” said Liz Pinczewski, Chief Operating Officer, CAPA – Centre for Aviation. “New routes continue to be added, mainly from destinations in Asia, emphasizing the attractiveness of Melbourne as a tourism and corporate destination.”
“If capacity remains as low as forecasted, this could increase average ticket prices, with evidence of this already being seen in 2018. Plans by AirAsia X to shift twice daily Kuala Lumpur service from Melbourne Tullamarine to Melbourne Avalon Airport also represents an interesting milestone for the city, and could benefit travelers greatly,” added Pinczewski.
“In an environment where demand is growing more quickly than supply and airlines’ highest operating costs of fuel and labor are on rise, it is more critical than ever for organizations to ensure their airline programs are tightly negotiated and underpinned by benchmarking to help navigate to best-in-class fares,” said Richard Johnson, Director, Asia Pacific, CWT Solutions Group.
Bucking the trend, economy class airfares on the Melbourne-Hong Kong route were down more than 5% year-on-year in Q1 2018.
“Between Melbourne and Hong Kong, we saw more seats for sale and full service carriers such as Cathay Pacific pricing aggressively to compete with LCC’s. This explains why economy class fares decreased more than 5%, while business class fares went in the opposite direction,” said Johnson.
The Business Travel Pulse report also reveals that hotel occupancy rates in Melbourne continue to rise. Continued strong business and consumer confidence in Australia is translating into robust domestic demand. At the same time, 2017 saw an increase in international routes to and from Melbourne, bringing additional customers into the market and adding to the already high demand in the city.
Occupancy rates are at 86.4% year-to-date, an increase of 2.3% over 2017. As a consequence, room rates have been increasing too, with the average daily rate (ADR) at $252, up $27 from last year.
“In a high occupancy market such as this, consolidation might not be the best strategy for corporate travel programs,” said Johnson. “Instead, companies should look at contracting with more properties to ensure greater availability and choice for their travelers.”
“Furthermore, given the limited opportunity to negotiate on room rates, companies should also explore other avenues for savings such as negotiating free breakfast and Wi-Fi for their travelers,” added Johnson.
To download a copy of the report, please click here.