Heading into peak season, expect increased costs!

For some time now we have been keeping an eye on the rising cost for the services that relocating employees need for their global moves and assignments. Coining the term, "relo-flation" last November, we asked Why is moo-ving costing more and what's behind "relo-flation?" We explored the impact of supply-chain disruption on household goods shipments, real estate and rental costs. We also looked at high demand related to previously "on hold" employee moves that were now initiating their relocations, and an increase in self-initiated moves (aka "hand-raisers") now that there is greater flexibility to work from a different location.

Since that post, we have been watching rising inflation and considering the impacts on mobility programs. A little over a month ago, I posted that "Costs for talent mobility will be higher in 2022", and in the post I referenced that travel app Hopper's Consumer Affairs Index Report published in January, was predicting that prices for airline tickets were expected to increase 7% per month for the next several months. Well, that might have been an under-prediction as Hopper followed that up with their new quarterly findings and now is reporting that the average price of a round-trip ticket is now $330—up 40% from the start of this year. Hopper foresees travel prices increasing to $360 in May, then tapering off once the summer season officially starts in June. International round-trip prices will stay relatively stable until June, when Hopper predicts they will rise 15%. But there are numerous reports and predictions that we'll likely experience record high airfares, even double or more the normal cost to many destinations throughout the summer and even into the fall. CNBC just shared that according to Mastercard Economics Institute's third annual travel report (Travel 2022: Trends & Transitions"), leisure and business flights surpassed 2019 levels for the first time since the pandemic! The return of business travel has been swift, as business flight bookings were only about half of pre-pandemic levels earlier this year. In the past when inflation has hit and energy and food costs have risen, travel demand has usually decreased. “However, given massive levels of pent-up demand in a post-pandemic world, this time could be different,” stated the report. 

According to this Forbes article, Four Reasons Airfares Are Rising, And Why Travelers May Not Mind, "We are all paying more to fill up our tanks, and it’s the same for airplanes. Fuel prices are a high source of airline costs, so it’s not surprising that passing this on to customer fares is happening." So yes, higher running costs are pushing up flight prices, but add to that the vibrant demand, limited capacity, and that airlines are excited to get back to profitability and you can see why the costs for flying are up over 50% compared to last year, and up 40% since the beginning of the year. Per The Hustle, the price of plane tickets increased by 18.6% in the month of April alone which is the biggest one-month spike in history of the Consumer Price Index! 

So with traditional "peak season" now in full swing (May is National Moving Month and May 16th-September 9th is the busiest time of the year for moving), and with costs rising for nearly every single relocation benefit, mobility teams need to set expectations internally by preparing the budget holders on rising costs related to moving their talent. With low availability in many housing markets for long-term permanent home purchases and rentals, a lack of short-term corporate housing options to meet demands, along with the same for rental cars, employees may find with extra expenses. Add to that the potential of increased scheduling challenges for household goods shipments over the summer and we are likely to experience an increase in exception requests. Lastly, for programs offering lump sums, the reality will be that employees are getting the same amount of money, but that money may not go as far. On top of that, scheduling services where demand is high and capacity is crunched is likely to be frustrating for many. 

The reality right now is that throughout the remainder of this year, costs for everything that relocating employees need are rising on the tailwinds of global inflation, demand and limited supply in major markets. Whether you are concerned about program costs, stakeholder reactions or the impact to employee experience, we suggest talking with your relocation management company (RMC) to start planning ahead.