The United Kingdom has a referendum coming up in June to decide whether to remain in the European Union.
A stronger U.S. dollar versus the euro and other currencies in Europe, the Middle East and Africa helped business travel per diems decline in the region in 2015, despite healthy demand. Further demand increases and a lack of new hotel supply point to per-diem increases in 2016, but economic and
geopolitical instability in Europe casts uncertainty on this year's currency exchange rates and business travel pricing.
For the 59 EMEA cities in BTN's Corporate Travel Index, the average per diem declined to $323 in 2015 from $362 in 2014. London again served as the most expensive, at about $554, down from $576. Once again, Muscat in Oman and the Swiss cities of Geneva and Zurich followed, though the
per diems in those cities also declined.
The U.S. dollar's strength against currencies in the region is reflected in the figures. For example, last year's Corporate Travel Index used a conversion rate of €0.80 to US$1, based on the Dec. 2, 2014, rate, but in this year's index, US$1 dollar is equivalent to €0.94, as per the Dec. 1,
2015, exchange rate.
The additional bang for the U.S. traveler's buck has continued into 2016, and BCD Travel consultancy Advito has forecast hotel rate increases of not more than 4 percent for the year in the major EMEA regions. Carlson Wagonlit Travel and the Global Business Travel Association offered a
similar forecast.
Uncertainty in Europe
Europe harbors healthy demand, steady economic growth and a settling economic outlook in Greece, but the refugee crisis and the United Kingdom's June referendum on its participation in the European Union have added uncertainty to the continent's 2016 pricing outlook, said Advito senior
managing consultant Claire Ollivier. "If the U.K. was to get out of the EU, the situation of uncertainty could lead companies to wait and see what is going on, which would probably lead to a business travel [downturn]," she said.
EU member states received more than 1 million requests for asylum from refugees in 2015, but Ollivier said impact on business travel demand and pricing has been limited to Greece, Macedonia and some areas of Croatia, Belgium and France. "There has not yet been a major impact on key
business destinations because we don't have that flow of refugees in the big cities," Ollivier said, "but it might have impact on general perception of safety and security in Europe and ease of travel within the European Union, which might have an impact on business travel."
The November terrorist attacks in Paris "didn't help" demand, she said, citing canceled corporate events. The impact was generally limited to Paris, however, and "things are back to normal right now" on the business transient side, she told BTN in March.
Oil Prices Dampen Middle East Demand
Low crude oil prices have affected demand and pricing in the Middle East, Ollivier said. While travel from North America and Europe to the Middle East has maintained the pace of recent years, demand from within the Middle East has declined, as has the number of travelers from Ukraine and
economically beleaguered Russia, she said. Given the region's investment in new hotel supply over the past few years, prices have held steady. Per diems in Riyadh, Abu Dhabi, Doha and Dubai each declined in 2015, even though those areas' currencies remained constant with the U.S. dollar.
Short Supply Drives Rates in Africa
Hotels suitable for business travel remain in short supply in many areas of Africa, despite high demand and development interest from such chains as AccorHotels, Ollivier said. As such, rates can be high particularly in Nigeria, though exchange rates drove the per diem in Lagos
down to $444 in 2015 from $506 in 2014. According to Ollivier, "It's very difficult to have strong predictions for Africa with the political instability and safety and security concerns, as well as pandemics, which can really change the game in a very short amount of time."