Strong global economy and rising oil prices are expected to push up the cost of air travel and hotel rates in 2019, according to an industry forecast released on Tuesday said.

The annual business travel forecast from Carlson Wagonlit Travel (CWT) and the Global Business Travel Association (GBTA) made this known in its report.

According to the forecast, airfares seen rising to 2.6 per cent and hotel rates up 3.7 per cent, although there are downside risks from a trade war.

In some countries, including India, New Zealand, Norway, Germany and Chile, airfares are expected to rise by more than seven per cent, it said.

“Speaking for the Asia-Pacific region, we are coming off a period three to four years ago where there was a lot of capacity in the system (and) fares was down pretty significantly, potentially lower than was sustainable.

“So I think we are getting to a bit more of a renormalisation of sustainable fares,” Michael Valkevich, CWT’s vice president for global sales & programme management, Asia Pacific said.

The International Air Transport Association in June forecast passenger yields, a proxy for airfares, will rise by 3.2 per cent before ending of the year, the first increase since 2011 as a stronger global economy drives growth in demand.

CWT/GBTA predicted a 3.5 per cent rise in airfares in 2018 in a forecast released in 2017.

Airline costs, including for fuel and labour, have been rising, leading carriers to attempt to push up fares or add fuel surcharges to maintain margins.

The CWT/GBTA 2019 forecast said the rise in hotel rates would be driven by an increased demand for air travel, which would fuel demand for rooms.

Room rates are expected to rise by more than five per cent in Asia and Europe, by 2.1 per cent in North America and to fall by 1.3 per cent in Latin America.

Hotel groups including France’s Accor SA (ACCP.PA) and U.S.-based Marriott International Inc (MAR.O) have reported strong growth in revenue per available room in Asia and Europe this year.

The CWT/GBTA forecast said in spite of its positive outlook, risks remained for the global economy in 2019 from the rise of protectionist policies, the stoking of trade wars and uncertainty over Britain’s exit from the EU.

Valkevich said the U.S.-China trade war had not yet led to any noticeable drop in demand for business travel, but it was a “downside risk factor” for the corporate travel industry. (Reuters/NAN)