Australia’s travel costs rise

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SYDNEY, 3 August 2018: The latest airfare survey covering routes from Sydney, released by CWT Solutions Group, the consulting division of Carlson Wagonlit Travel, indicates economy class airfares on several key domestic routes from Sydney increased during the first six months of 2018.

Economy fares to Melbourne, Canberra and Adelaide increased more than 5% year-on-year.

Fares on the Sydney-Perth route bucked the trend, with economy ticket prices falling 1 to 5%, while business class fares increased more than 5% year-on-year.

Looking at key international routes, flights from Sydney to Auckland and Singapore saw the biggest increases in fares.

These findings are published in the latest Business Travel Pulse report, which focuses on the Australian city of Sydney.

The good news is that the threat of rising fuel prices has subsided slightly. If Brent Crude settles down at around US$70 a barrel, nervousness about higher costs should diminish, the survey suggested.

Sydney Airport’s capacity growth increased strongly in 2017, with the volume of available seats increasing by 4.2%. The projected 2018 full-year capacity is also up, continuing this increasing trend year-on-year since 2013.

This correlates with passenger traffic trends that have been steadily increasing since 2012. Passenger traffic increased marginally in 2017, but less than the increase seen in capacity, suggesting benefits for the traveller from a competitive average ticket price (ATP) perspective. The 2018 passenger evolution increase appears similar to the 3.5% increase seen in 2017. However, ATP may increase if passenger evolution increases outpace capacity.

“While Australia was the initial testing ground for the low-cost long-haul model, in recent years there has been almost no growth in capacity in this segment in Australia,” said Carlson Wagonlit Travel senior director, multinational accounts, Asia Pacific, Akshay Kapoor. “This could be one of the factors contributing to higher ticket prices on international routes.”

The report also reveals that the hotel occupancy rate in Sydney declined slightly to 83.5% year-to-date, a decrease of 0.6% over 2017. Correlating with the somewhat flat occupancy, the average daily rate (ADR) has increased by 2% to AUD285 in 2018.

“Sydney remains one of the most supply-constrained hotel markets globally,” said Kapoor. “The city still has the highest occupancy rate in Australia. Consequently, corporates are paying more to secure Last Room Availability (LRA) contracts with hotels – and even when they do have such contracts in place, they struggle to book their negotiated LRA rates as rooms are sold out.”

Last Room Availability (LRA) rates, which are typically higher than regular corporate rates, give a company the right to buy a room at their contracted terms and prices even if the hotel only has one room left in that category. So far in 2018, Sydney has seen the biggest spike in LRA rates across the country, with an 8% increase over last year’s rates.

“Traditionally, the rule of thumb in business travel has been to first book your flight at least two weeks before the trip, and then book your hotel,” added Kapoor. “However, booking hotels early is exponentially important in markets like Sydney, to access negotiated rates. It is recommended to book at least 30 days in advance for properties in the Sydney CBD.”

“At the same time, companies should look closely at their hotel programmes and assess whether it’s sensible to pay the hefty premiums for LRA rates. In many cases we’ve found companies are better off paying the non-LRA rates, particularly if they don’t have a lot of travel to Sydney during the peak seasons.”

To download a copy of the report, please click here.

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