Costs for talent mobility will be higher in 2022

Last June, I shared a new word that I didn't know previously..."fernweh." In a post titled, "How will 'fernweh' impact your global mobility program post-pandemic?," we learned the German word means "wanderlust" but on steroids and describes the intense desire to go travel internationally!  

Right now, many are wondering if we are getting closer to the end of the pandemic and more accepting of living with the virus. With that, I would expect a massive amount of "fernweh" would be unleashed across the systems that support global travel and employee mobility. According to this article from TPG, as we continue to see travel restrictions and impediments being eliminated, people are "jonesing to hit the road again." While there are still some travel deals to be had, the article focuses in on why booking travel now would be a good idea so as to avoid much higher costs that are coming in the near future. U.S. domestic travel has already gone up and will continue to, and they project that while international travel has not recovered yet, volumes and cost increases are certainly expected to come. According to the travel app Hopper's Consumer Affairs Index Report published last month, prices for airline tickets are expected to increase 7% per month for the next several months. 

This opens the door to a bigger conversation that looks not just at flights, but other expenses within global mobility programs to consider what will happen throughout the next year. From the way it looks, it won't just be higher flight costs that are going to elevate expenses for your mobility programs this year. Inflation is pushing up costs for gas, meals, lodging and other miscellaneous expenses often reimbursed per relocation and assignment policies. That will cause an increase in en route travel and homefinding trips.

Rents and real estate costs will also continue to escalate, albeit probably not at the same rate of increase as last year. But relocation program expenses that are related (think lease breaking fee reimbursements, security deposits and rents for assignments, home sale and home purchase related benefits, and even temporary accommodations) are likely to show up as a greater amount per person going through the mobility process in 2022.

Connected to real estate and high demand is the benefit of short-term housing needs in the form of temporary living benefits. Our friends at Synergy shared:

With 2022 pent-up demand set to release once the Omicron variant recedes, apartment supply will be tough to come by in most major business travel markets throughout the year. Furthermore, as leisure travelers begin using the product and realize the benefits of a serviced apartment over more traditional options like a hotel or poorly serviced Airbnb, the available supply will further dwindle.

The reality right now is that in the immediate term, rates are rising on the tailwinds of global inflation, demand (consumer and business), and limited available supply in major markets across the world. Average rents for a one-bedroom apartment in parts of the U.S. have doubled year over year, while rents in the major cities like San Francisco and New York are experiencing record rental rates. 

Typical expatriate allowances (dependent education, cost of living, housing and transportation) are all likely to increase, along with the fact that volumes are also likely to begin increasing once again. It may be time to reconsider updating cost projections, re-evaluating how frequently you are updating allowances, and reconsidering how the compensation is being delivered (home, host or split payroll).

These increased costs will affect each organization differently, depending on the type of mobility program they have. Lump sum programs may want to reconsider their "contribution" as the amounts won't go as far as they have in the past and the employee is going to be impacted by the increase in costs. 

Lastly, there are ongoing challenges with labor and supply chains that will continue to impact the movement and costs associated with household goods shipments, both domestic and international. Freight costs are expected to remain high in 2022. Experts share that shipping and logistics costs are expected to continue rising this year due to tight capacity and ongoing high demand. Ocean-shipping executives say they expect the rates set in many annual contracts will double compared with agreements struck earlier this year, before supply-chain bottlenecks squeezed capacity. Some trucking companies project double-digit growth in contract rates for 2022. Trucking companies (including household goods movers) and other logistics firms note their own higher costs, including rising salaries as they have sought workers in a tight labor market. It is good to understand that in 2021, domestic shipping rates for moving goods by road and rail in the U.S. were up 23% from the year before. Most anticipate continued increases until 2023. Sea shipments are likely to reach record highs as travel restrictions go away and peak season arrives.

It is very difficult to predict exactly how things will play out over 2022, but at this point, we are anticipating that the costs for supporting talent mobility will be higher this year than they were the past few years.