preparing for takeoff: air travel outlook for 2016

PREPARING FOR TAKEOFF:
AIR TRAVEL OUTLOOK FOR 2016
Mining 2015 data to understand when to buy,
expected ticket prices, and fare differentials
It’s a good time to explore the world by plane. Across the globe, air carriers are adding
destinations, flight schedules are expanding, and travelers—both business and
leisure—are hitting the skies with increasing frequency. According to the International Air Transport Association (IATA), global air travel rose approximately 7 percent in
September 2015 compared to a year ago, and is now higher than it has been at any
point in the last five years.
In short, at the end of 2015, air travel is flying high, which bodes well for travelers.
At Expedia, we are seeing these trends first-hand. Between October 2014 and October
2015, we logged almost 8 billion searches across our family of websites—another
all-time high. We now have in our database more than 300,000 unique routes, known
in the industry as Origin & Destination pairs, or O&Ds. That also is a new record. We
process more than 1,400 terabytes of data each year—a staggering amount equivalent
to more than 6.7 billion 200-page books. Additionally, our partners at Airlines Reporting
Corporation (ARC) have information on more than 10 billion passenger flights, providing a
detailed view of air travel.
These kinds of numbers can be daunting, and making sense of the data behind them
admittedly is a Herculean undertaking. Yet we relish the job. Using data science and
travel savvy, every year we work to take the figures and put them at the fingertips of
travelers to help make them confident to click, book, and go. Our ultimate goal is to
help travelers feel informed and empowered to get past travel decision-making and
move into what we like to call travel moment-making.
1.
Therefore, this report looks back at air travel data in 2015 and makes a few bold predictions
heading into 2016. The document presents several key takeaways:
1. Between October 2014 and October 2015, global air ticket prices declined on average
about 8 percent versus the prior year.
2. In our data, the price of travel within Europe declined the most in that timeframe, making
these routes some of the best potential bargains for 2016.
3. On the whole, the best time to purchase economy tickets in North America for travel
within North America is about two months in advance.
4. It is hard to predict the best day of week to find the lowest ticket prices because airlines
constantly are adjusting prices. If you find a fare that seems like a good deal, buy it.
The report itself represents the third installment in an ongoing effort to summarize industry
numbers every six months. This summer, we published a report summarizing trends from the
first six months of this year. At the end of 2014, we published another report that spotlighted
travel industry performance for 2014 and predicted new directions for 2015. In those two
previous studies, we conducted reviews of industry data and trends observed in the North
America, Europe, and Asia-Pacific regions. This year we primarily focused on North America
and Europe, due mostly to the great bargains we found through our analysis.
We are fortunate to rely on deep partnerships to conduct these reviews. This particular report
represents Expedia’s analysis of data from ARC, utilizing other industry data sources as needed,
such as IATA, Diio Mi, and the Airline Tariff Publishing Company (ATPCO). We are excited to
work with these partners on an ongoing basis, and value their input as we put together this
semi-annual report.
2.
All about the price
If we have learned anything about our customers over the
years, we know most travelers base air travel plans primarily
on the price of tickets, and will stop at nothing to find the best
deal. Expedia research indicates travelers search an average
of 48 times on eight different sites before booking a flight.
For some people, the search can end up taking hours.
In our prior reports, we determined most air ticket prices to
some of the top travel destinations worldwide would decline
slightly in the second half of 2015 for customers in the Europe
and North America regions. We also predicted slightly increasing
air ticket prices across Asia-Pacific. Overall, these forecasts were
correct—a reality about which Nostradamus would be proud.
On a global scale, with prices adjusted for exchange rates,
economy-class air ticket prices (ATPs) declined approximately
8 percent between October 2014 and October 2015, with the
biggest drops in July and August of this year.
Intra-Europe Economy Class2
Month
YOY ATP Change
January
-14%
February
-16%
March
-23%
April
-18%
May
-18%
June
-18%
July
-18%
August
-18%
September
-15%
October
-16%
2
3
Source: Airlines Reporting Corporation
Source: Airlines Reporting Corporation
Source: Airlines Reporting Corporation
3.
Month
YOY ATP Change
January
-3%
February
-5%
March
-8%
April
-9%
May
-8%
June
-9%
July
-13%
August
-10%
September
-7%
October
-8%
Particular ticket types in certain regions experienced more
acute price drops through the first 10 months of 2015 versus
the first 10 months of 2014. In Europe, for instance, economy
air ticket prices on intra-Europe flights declined the most
throughout 2015, bottoming out at 23 percent (versus the
prior year) in March. On average, these prices were about 17
percent lower in 2015 than they were in 2014. These numbers
indicate 2015 was a great year for travelers who wanted to visit
Europe and hop around to see different countries during their
stay. Due to the continued strength of the U.S. dollar against
the euro, we believe these trends should continue at least
through the first few months of 2016.
The data includes ARC processed US transactions, and US and BSP processed international transactions.
The international transactions are converted to US dollars based on the exchange rate on the date of
the transaction. This implies the impact of the exchange rate fluctuation is included in the year-on-year
variances.
Other regions saw much more modest price drops. Economy
travel in North America, for instance, averaged 5 percent price
declines on intra-North America flights through the first 10
months of 2015, with the biggest drop in July (8 percent).
1
Global Economy Class1
Intra-North America Economy Class3
Month
YOY ATP Change
January
-3%
February
-4%
March
-4%
April
-4%
May
-3%
June
-4%
July
-8%
August
-5%
September
-5%
October
-6%
4.
For travelers interested in going from North America to Asia-Pacific, economy air ticket prices fell on average
13 percent from the prices we recorded the previous year. The biggest savings potential occurred in August
2015 with a 21 percent decline—meaning there were some great deals to Japan, China, and surrounding
nations.
For specific prices to particular destinations, we dug through the last 12 months of data to find some of the
lowest expected air ticket prices across a selection of our favorite destinations. Looking into 2016, here is our
perspective on the top destinations to which travelers can find the best deals. Once again, intra-European
destinations top the list.
Origin
Destination
Approximate Economy ATP4
Sweden
Berlin
$216
Brussels
Rome
$229
Austria
Barcelona
$231
Ireland
London
$234
As always, another way travelers can save money when booking travel is to book air at the same time as
hotel and rental car. This process, which we refer to as bundling items into a package, delivers discounts
across the board; Expedia data for 2015 shows customers saved an average of US$226 based on actual
bookings, but easily can expect to find deals that could save them up to US$568 across all destinations.
That number is even higher in resort destinations such as Mexico, Hawaii, and the Caribbean, where Expedia
data indicates savings can be in the range of US$800-$1,100.
The average economy ticket price for travel between regions was calculated for round-trip itineraries for all tickets issued for the 12-month period between November 2014 and
October 2015.
4
5.
The benefits of buying early
Of course a number of factors contribute to air ticket price (see sidebar). One of the biggest of the bunch:
how far in advance of the departure date travelers buy. We analyzed industry data to figure out the biggest
potential savings for ticket prices based on advance purchase. Most of the results confirmed the findings
from our last report.
The 2015 data indicates that travelers can save up to 36 percent if they purchase round-trip flights in economy
class intra-Europe and they buy at least 21 days in advance. According to our findings, travelers also can save
big on some North American itineraries purchased at least 21 days in advance. Here is a rundown on some of
the savings in that region as analyzed by Airlines Reporting Corporation:
• North America to North America, premium: 27 percent savings
• North America to North America, economy: 31 percent
• North America to Europe, premium: 20 percent
• North America to Europe, economy: 21 percent
• North America to Middle East, premium: 25 percent
• North America to Middle East, economy: 20 percent
Within the context of these findings, our data suggested that the best time to buy an economy ticket is even
farther in advance—usually starting about two months ahead of the desired departure date.
6.
Price
Economy Within North America
$600
$550
$500
$450
$400
$350
$300
Average air ticket price equals $263
$250
Lowest air ticket price equals $237
(57 days in advance)
$200
$150
$100
180
150
120
90
60
30
0
Days Prior to Purchase
Sticking with the North American market, a review of air ticket prices over the first 10 months of 2015 indicates
that the best time to buy an economy ticket for travel within the region this year was 57 days in advance.
ARC analysis showed that the average fare in North America between 0 and 180 days of advance purchase
for 2015 was US$263, and the price at 57 days out was US$238, a savings of about 10 percent. Last year’s
report also indicated that 57 days was the best time to buy an economy ticket within North America.
ARC found optimal lead times for tickets from North America to international destinations are even longer:
• North America to Europe: 176 days in advance, for a savings of 11 percent
• North America to Caribbean: 77 days in advance, for a savings of 5 percent
• North America to Asia-Pacific: 160 days in advance, for a savings of 13 percent
• North America to the Middle East and Africa: 144 days in advance, for a savings of 24 percent
• North America to South America: 90 days in advance, for a savings of 10 percent
Airlines Reporting Corporation analysis of data from other regions yielded similar results. In Europe, the best
time to buy an economy ticket for another destination within Europe was 140 days in advance. The average
fare in this market between 0 and 180 days of advance purchase for 2015 was US$176, and the price at 140
days out was US$156, a savings of about 11 percent.
7.
Price
Economy Within Europe
$400
$350
$300
$250
$200
Average air ticket price equals $175
$150
Lowest air ticket price equals $156
(140 days in advance)
180
150
120
90
60
30
0
$100
Days Prior to Purchase
Wherever you are traveling, wherever you are headed, the general rule is that the earlier you buy an air ticket,
the more money you can save. Remember: buying air tickets alongside hotel and car rental reservations can
save even more money—again, in some cases nearly 20 percent.
8.
Best day to buy
Of course the number of days in advance of a trip is
only one aspect of when travelers should buy a ticket.
Another factor: day of the week.
For years, travelers have wondered what day of the
week yields the best deals. In our previous reports,
we have suggested that Tuesday and Wednesday
generally are the best days by a small margin. This
time around, our data indicated that, on average,
weekends provide a great opportunity to find great
deals, but Tuesdays are still close behind.
Based upon 2015 ARC data, we put together a heat
index detailing the average ticket price by travel day
of the week for both economy and premium travel
globally as well as from North America to various
regions.
Here are the numbers:
9.
Economy
Day of Week
Global
North
America North
America
North
America Europe
North
America Caribbean
North
America Asia Pacific
North
America Middle East
North
America South
America
Saturday
$570
$457
$1,208
$560
$1,251
$1,2777
$891
Sunday
$543
$451
$1,215
$562
$1,285
$1,270
$919
Monday
$588
$495
$1,303
$576
$1,324
$1,345
$976
Tuesday
$584
$490
$1,326
$575
$1,332
$1,379
$985
Wednesday
$594
$493
$1,333
$575
$1,343
$1,385
$987
Thursday
$589
$495
$1,325
$576
$1,341
$1,325
$989
Friday
$612
$507
$1,346
$583
$1,353
$1,363
$1,008
North
America Caribbean
North
America Asia Pacific
North
America Middle East
North
America South
America
Premium
Day of Week
Global
North
America North
America
North
America Europe
Saturday
$1,950
$1,016
$4,928
$916
$4,817
$5,239
$2,653
Sunday
$1,805
$983
$4,819
$905
$4,967
$5,394
$2,584
Monday
$2,843
$1,181
$5,817
$1,024
$5,964
$6,066
$4,087
Tuesday
$2,916
$1,201
$6,096
$1,025
$6,005
$6,241
$4,093
Wednesday
$2,962
$1,200
$6,053
$1,032
$6,071
$6,170
$4,125
Thursday
$3,004
$1,215
$5,854
$1,041
$6,116
$6,109
$4,171
Friday
$3,181
$1,257
$5,915
$1,072
$6,186
$6,132
$4,329
It is important to note some general caveats when evaluating which day of the week yields the best deals.
For starters, most analyses often will show low air ticket prices on the weekend because these are the
days on which most leisure travelers purchase tickets. Given that business travel is purchased during the
week and has a higher air ticket price on average because of other factors (shorter advance purchase,
higher concentration of premium-class seats, etc.), these results are not unexpected.
Furthermore, because we use such a broad set of data that combines many advance purchase windows,
there always is a tendency to gravitate toward the mean fare in a particular market, which will cause the
variance across days to be minimized.
Given this normalizing effect, and accounting for the fact that most airlines change fares many times a day,
our advice is simple: if you find a fare that looks like a good deal, grab it, regardless of the day of the week.
10.
11.
Looking ahead
We noted that the airline industry is flying high and, overall,
2015 was another great year to explore the world through
travel. Most air ticket prices declined this year, and looking
forward to 2016, we expect prices will continue to trend
downward as airlines continue to add capacity.
Finally, as Expedia gears up for 2016, we are excited to
announce the debut of a tool that enables travelers to stay on
top of ticket prices and notifies them if those prices are likely
to change. This tool is powered by a proprietary statistical
model that takes into account data from the 14 days before
each price search and uses that data to predict what you
would pay should you make the same search in a week. The
tool expresses its findings with a confidence rating; that is,
the tool gives travelers a percent-based likelihood that the
price will increase or decrease based on the data it has used.
If the tool suggests a high likelihood a price will decrease in
a week, you might decide to hold off on booking to try for a
lower fare. Conversely, if the tool suggests a low likelihood
the price will change, you can rest assured you’re getting the
best price if you book now.
Perhaps the best thing about this tool is that the data used
to calculate the confidence rating comes primarily from other
users. The more active users on the site looking for different
routes, the more accurate the model is. Perhaps the only
downside: if you search fares on a particular route that is
lightly traveled, the tool may not have enough comparative
data to give you a confidence rating at all. But Expedia is one
of the largest travel agencies in the world, giving you all the
information you need to make this big purchase.
This price predictor tool is a great example of one of the
many advancements in Expedia’s ongoing effort to move
from selling airplane tickets to providing a more thoughtful
shopping experience. At a time when flight options are
growing every day, we expect this attention to detail will be a
big help to travelers all over the world.
12.
Mitigating factors for ticket price
A number of factors impact air ticket prices and the
fluctuations in price between premium and economy. Here is a
look at some of the biggies:
• Competition. When competitors lower their prices,
many airlines feel pressure to follow suit in order to stay
competitive. This means competition is a huge factor in ticket
price in just about every market.
• Oil prices. Common sense would dictate that when oil
prices rise, so do airline ticket prices, since planes run on
jet fuel made from petrol. The reality, however, is that while
oil prices impact the carriers’ cost structure and profits,
each airline sets its prices based on supply/demand, which
operates independently. In the long run, of course, low oil
prices provide downward pressure on fares as airlines are able
to sustain margins while dropping fares.
• World events. In the modern era, tragic and catastrophic
events such as terror attacks or natural disasters can impact
ticket prices to particular regions temporarily and without
warning. This is one of the reasons it is good to book ahead.
13.
14.