Of course, global financial markets being what they are, the chances are good that by the time you actually read this, what’s happened in China will be displaced in the headlines by some other world event, and the Middle Kingdom’s meteoric growth curve, though somewhat abated, will continue its upward path.
While the latest economic news out of China may raise some angst among those who lay awake at night worrying about the arcana of macroeconomics, prospects for business travel appear not to have slowed – at least not yet. As late as March, the Global Business Travel Association was forecasting double digit growth for Chinese business travel, and even with the recent setbacks to the country’s overall economy, its business travel sector continues to show signs of strength. In fact, business travel in the world’s most populous nation is, to put it simply, big. According to GBTA, spending for Chinese-originated business travel topped $260 billion in 2014.
A major factor underlying the drivers of growth, according to the association, is a continued shift away from exports and toward consumerism. China’s business travel was originally projected to grow at an 18 percent clip this year. That rate of growth was revised downward in March to just over 14 percent; still, that represents a huge volume of business travel – potentially exceeding a hefty $330 billion in 2016.
Domestic travel continues to dominate the corporate travel market in China, and this will most likely be the case for several years, according to David Reimer, vice president and general manager, American Express Global Business Travel, APAC. He notes that with the country’s population of 1.3 billion and the number of cities with one million residents, it’s hardly surprising that so much business travel is domestic. At the same time, growing Chinese companies are seeking to become major international players which are truly competitive on the world stage.
“We anticipate that the demand for international travel will increase over the next few years,” he says. “And the need for multi-national travel management companies will grow with the demand for international travel.”
In China, booking international travel is slightly more complicated than domestic, so robust online booking tools and highly skilled travel counselors are necessary. In addition, both Chinese companies and multinational companies based in China are starting to recognize their obligations to their employees under duty of care, which Reimer says is a fairly recent concept in China.
“There is an increasing awareness of the importance of being able to track traveling employees, either domestically or internationally,” he says. “As such, there are significant advantages to having a global travel management company with a footprint in many countries.”
Unraveling the Enigma
The potential benefits offered by the business of business travel in and to China may be easily understood. In a number of ways, however, China presents different challenges than those faced by managers of corporate travel in other developed economies.
“Travel managers looking to consolidate their travel program in China will find a few significant differences in the way travel is managed,” says KJ Wu, deputy general manager, China for Carlson Wagonlit Travel. “For example, there is no one GDS that can offer onestop-shop booking, and credit cards are not widely used for payment in corporate travel as of yet.”
The overall business travel sector in China may not be quite as advanced as in the United States or Europe, Reimer agrees. But, he notes, due largely to the adoption of technology, “the industry is changing rapidly and quickly approaching the level of maturity we see in other more developed economies.”
For example ten years ago, there were no online booking tools for business travel in China, he says. Then in 2005, CITS American Express Business Travel, together with Travel Sky, became the first travel management company to introduce an online booking tool to China. Fast forward to today, and the adoption of online booking tools by travelers in China compares favorably with more developed markets.
The concept of consulting and advisory services is also growing in China, as are emergency, duty of care and crisis management solutions. “I believe these services will continue to grow in China as the market matures,” Reimer says. “In the next few years we are likely to see a shifting focus from ‘cost optimization’ of travel programs to ‘traveler empowerment,’ whereby there will be a heavy emphasis on using big data and analytics to help us understand our businesses and our customers better.” Looking ahead, the voice of the traveler will become increasingly stronger and more important, he adds.
A promising development is that online transactions are becoming more commonplace in China. For example, recent survey results show that 44 percent of organizations responding reported the use of a corporate online booking tool last year, up from 41 percent in 2013 and 30 percent the previous year.
A similar trend can be seen with mobile applications, which have lagged behind in China’s business travel compared to the leisure sector. Mobility solutions have only recently started to emerge as a booking channel, according to Reimer, who reports that together with TravelSky, CITS American Express Business Travel has recently launched a mobile solution. This application allows business travelers to keep track of their itineraries, last minute cancellations, and changes of departure gate, while also managing ticket changes and refunds.
“It’s most important for travel managers in China who are considering adopting online and mobile booking tools to ensure the solution they choose is adequate in terms of security, data capture and overall travel policy enforcement,” Reimer says.
Variance in expense management systems can also be expected. Manual reporting and audit processes are commonplace in China, Wu says, although more and more companies are looking at the possibility of integrating TMC with a client payment system or alternatively using UATP as the optimal choice.
Room for Negotiations
When it comes to hotel negotiations, the Chinese scene offers another set of challenges. “There is a wide variety of properties, from international hotel chains, to country-wide hotel chains and local, independent properties,” Wu says. “Hotel negotiations can be very complex and time consuming.” Having a local team to support with communication and data consolidation is recommended, he says.
Hotel spending as a percentage of overall travel spending continues to increase proportionately, representing 23 percent of a total T&E budget in 2014, according to American Express.
“What is interesting about hotels in China is that growth is occurring at both ends of the spectrum, both high-end luxury and budget accommodation,” Reimer says. In 2014, five-star plus hotel accommodation represented 13 percent of overall hotel spending, an increase of 6 percent from the previous year, he explains. At the same time on other end, economy and moderate hotel spending also grew by 7 percent, to 57 percent.
“Hotel capacity continues to grow across the board,” Reimer says. “And there is still room for negotiation, particularly when it comes to ancillaries like WiFi and breakfast.” American Express figures show that 83 percent of organizations now use negotiated hotel rates, an increase of 5 percent from the previous year.
Travel managers looking to consolidate their travel program in China should keep in mind that pre-trip and pre-ticket approval is commonly required, Wu advises. “This means trip sign-off can sometimes take a little longer,” he says. “And hotel bookings through the TMC often are not mandated, so it would be worthwhile investigating the best way to achieve policy compliance.”
Even such everyday functions as auto rental have their own unique China-centric focus. “The largest form of car rental is with a driver,” Wu says. “And mostly we only see demand in major cities.”
Methods of payment – especially the use of credit cards – is another area that can bring surprises. Deven Somaya, director and regional head, commercial cards, Asia Pacific treasury and trade solutions for Citi, points out that that the domestic market relies on the Union Pay network rather than the Visa/MasterCard network. While some merchants do accept cards in the Visa/MasterCard system, others have merchant terminals that only accept Union Pay cards.
“For travelers from outside of China, this can prove to be a challenge in terms of card acceptance, mainly in second and third-tier cities.”
Merchants on the Union Pay network have a different classification and in some cases travelers may have their cards declined. For example, a restaurant may be tagged as a charitable organization, which may be blocked by a corporate cards issuer, Somaya explains.
In addition, local networks in China may not always offer the same level of data. Merchant names can at times come through in the local language, which some clients’ systems may not be able to process if they are automatically defaulted to English.
And in travel booking, the ability of the card network to process card-not-present transactions may be limited, along with the ability for travel management companies to host PII (personally identifiable information) due to lack of PCI compliance. Progress is being made in these areas, Somaya says, but for the time being, they can still pose problems.
Getting Buy-In
Given the complexity of travel policies in China, it’s important to get buy-in from your internal stakeholders as early as possible, and to work closely with your local team there, Wu says.
“Communicate to travelers to ensure they know what you want to achieve, why it’s important, and how they can help when it comes to your travel program,” he says. “Chinese travelers are very good at following the rules and regulations if policies are clear.”
Another plus is the potential for major leaps forward in improving program effectiveness. Corporate travel managers in China have the opportunity to make tremendous process efficiency gains, largely through the adoption of technology, Reimer says. “Through multinational travel management companies, travel managers can draw upon best practice from leading travel programs and experts internationally.”
