Chief executives of global companies in six industry sectors -- hospitality, retail, cruise, technology, destination marketing and tour operations -- offer their assessments of the business environment they expect to be facing next year. The interviews were conducted by Editor in Chief Arnie Weissmann.
We expect both our businesses -- American Express Global Business Travel and Travel Leaders -- to grow at about the same rate in 2016 as 2015. In fact, we’d be very happy if 2016 turned out like 2015: Travel Leaders was up strong double-digit percentages in 2015.
North America continues to have strong travel demand. In general, air carriers have shown restraint in adding capacity, and there’s an equilibrium between the demand and the pricing they can command. With hotels, it’s more a market-by-market determination, and a striation within that: different demand at the lower, middle and high levels. But they’ve also been disciplined, and they’re mostly adding capacity to meet demand rather than to stimulate it.
In South America, the Brazilian market is so big that as goes Brazil, so goes Latin America. And Brazil is probably going to fall off precipitously. I think you’re going to see a contraction in demand for both leisure and business travel there.
And you’re going to see, probably, flat demand in Europe. In general, demand will be down, but government and European Union-driven demand will go up. German companies are traveling, they’re doing business abroad and the German consumer seems to be enjoying some halcyon days, traveling all over the world. Demand is exceptionally strong, and that market is extremely attractive.
Indonesia’s doing well. Malaysia’s doing well. Vietnam’s doing well. So I think you’ll see Southeast Asia keep going. The surprise could come in the Chinese market. You’re seeing a lot of group movement, and the FIT traveler continues to be strong, but I think it’s hard to read how the Chinese market is going to do over time. It’ll probably move lockstep with Chinese GDP.
The one [region] where I think you’re going to see a big surprise is the Middle East. Oil prices are driving down travel from an exploration and production perspective, but the Middle Eastern consumer is going to continue to get stronger. You might see 7% to 9% growth on the top line, for two reasons: Air capacity constraints that exist in the U.S. don’t exist there, so they’re stimulating demand with capacity and pricing. And they’re flying to all kinds of new destinations direct out of Doha, Abu Dhabi and Dubai.
When you roll all of that up, you’re probably going to see, on a revenue basis, 2.5% to 3% growth in the aggregate.
The growth in our businesses, on a profitability basis and on a revenue basis, exceeds what the OTAs are doing.
I’m sitting in Paris right now [Dec. 3], having met with our employees this morning at AmEx Global Business Travel, and the [post-terrorism] feeling is palpable in France. I think it’s palpable all over the world. But five or 10 years ago, if you had an event like this, the traveling public would’ve stayed off planes for a protracted period of time. I think you’re going to have a situation where people are concerned, but they’ll still get on planes. I think there are other risks they’re worried about, like pandemics, but I think the elasticity of the kind of tragic events that happened in Paris is shorter and less pronounced than it used to be.
Still, the more elective the travel is, the more people won’t get on planes or stay in hotels. Some business travel is elective, some is absolutely necessary. And I think people feel the same way within leisure travel. If they’re going to visit an ailing relative, they’re going to see that as necessary travel, and other travel is elective.
In leisure travel, one significant trend is that people are less invested in brands than in the past, and they’re more invested in experiences. So rather than flying across the world to stay at luxury branded Hotel A or B, they’re traveling to get a collection of experiences for themselves and their families. It’s that buzzword: “authenticity.” People are more willing to step outside their comfort zone in leisure travel. We’re seeing a lot more active vacations than before. We’re seeing a lot more people pay attention to environmental issues than before. People are very, very focused on what collection of memories they’ll come away with from a vacation.
The retail business traveler today is very much about delivery of good pricing and service in a homogenous way all over the world. But it’s starting to change. As much as the OTAs are growing and as much as online direct-to-supplier is growing, I would say what might be called the traditional way of buying travel is growing more and more and more. People are viewing their travel agents and counselors as consultants, the same way they view their private bankers.
As people get wealthier and more successful and experienced traveling, they’re looking more and more for an opinion to be given by their travel counselors. And although opinion can be found on TripAdvisor or elsewhere on the Internet, I think they’re looking for a curated opinion from someone who has experience, can compare experiences and understands what their customer’s requirements are.
We’re really happy with the way our businesses are growing. The growth in our businesses, on a profitability basis and on a revenue basis, exceeds what the OTAs are doing. We wouldn’t want to buy an OTA because we think that might be dilutive to our growth. And looking forward, I think the biggest thing that’s going to affect the OTAs is that they earn most of their money by selling hotel rooms, and I think there’s a mass of consolidation in hotel companies coming. That will affect the dynamic of how OTAs earn money and how they interface with the hoteliers. It’s going to change.
There are a couple of trends we’re paying close attention to. We think we can use the data that we have a lot better to serve our clients. In 2016 and 2017, expect to see lots of products that are based on data analytics and data science. And we’re investing heavily in booking technology and mobile technology. I think more and more people are going to get comfortable interfacing with their travel agent over the phone, whether by text, through an app or location-based services. Travelers are going to get a lot of input, both before they travel and while they travel. And there’s going to be a lot of content -- branded content -- available from agents that has never been available before.