Welf Ebeling, VP Operations of Asia Pacific for the Global Business Travel Association (GBTA), shares his perspectives on business travel in China and what steps are needed to hold its position as a business travel powerhouse.
We’ve seen the reports that China is outpacing the U.S. in terms of business travel spend, but there are also reports of economic slowdowns. How does that line up?
What’s happening is that no other country has ever had such rapid growth in business travel spend. China and the U.S. are almost comparable economies in terms of business travel spend, but not in terms of how fast it’s grown.
In 2013, the U.S. reached about $274 billion in business travel spend; China topped $225 billion. To give that context, China’s spend back in 2000 was $34 billion.
How has China’s growth differed from the U.S.?
The U.S. has grown at a “normal” rate, obviously with a lot of peaks and valleys, over the course of several decades. At the moment, the U.S. is growing at a 4.4 percent increase per annum. China grew at about 16.5 percent, and currently, it is growing somewhere between 9 and 11 percent. Frankly, the fact that China’s business travel growth has slowed down doesn’t really matter. It still is double the rate of the U.S. or EU. It’s not rocket science to know that business travel spend in China will overtake the U.S. within 12-24 months.
What do you think caused the slowdown?
There are a lot of factors playing into this slowdown. It may have come from an overall global economic situation and it may also be a more controlled situation.
The Chinese government likely realized the market was overheating. At that point, it probably decided that it needed to consolidate more. With the debt crisis in Europe, and the fiscal cliff in the United States, exports started slowing down.
At the same time, China had a historic government change. Whenever something like that happens in China, the year before the transition, everything–including policy changes–comes to a grinding halt.
How is this new government affecting corporate travel?
The new government implemented something called the Big Push, which means concentrating on domestic issues, such as improving infrastructure: expanding the high-speed rail system; building road systems; doubling the capacities of the four big airports. The Chinese fear excessive growth. Growth is good but only when it’s controlled and when there’s infrastructure to support it.
The Chinese government is trying to control and curb corruption. Transparency has become a much greater issue and on both the supplier and buyer sides, their dealings are more scrutinized.
So what does this mean for business travel planning in China?
At a time when business travel expenditure is growing at such a fast rate, companies in China–even the most conservative ones–will have to deal with travel management. This is an industry that’s becoming more high technology, and a society that’s playing more with mobile technology than anyone else. They will need to supplement this with corporate travel policy systems.
It would be foolish to expect that Chinese enterprise will automatically embrace Western-style travel management. China’s business travel spend has grown at a phenomenal rate over the past 14 years and, in many ways, the whole concept of travel management is still relatively unknown.
What is the role of technology in all of this?
Frankly, the fact that China’s growth has slowed down doesn’t really matter. It still is double the rate of the U.S. or EU.
Mobile technology, decentralization of the distribution system, and new government regulations on expense control will bring changes to existing travel policy systems.
For decades, the TravelSky system had the monopoly on distribution rights within China. Now, as a part of the agreement to join the World Trade Organization, they’ve teamed up with foreign GDS like Sabre, Abacus and Amadeus. They’re trying to become more decentralized, but this is still in its early stages, and it’s domestically controlled.
Meanwhile, the involvement of China’s Ctrip with Priceline will undoubtedly push their OTA business more into a Western format. But I assume this will first of all be practiced in the leisure market.
What are some of your predictions for corporate travel management in China?
From our perspective, training and education are key. In my opinion, Chinese travel management will evolve and align itself with global procedures, however it will be based on local practice. Travel will not just be seen as commodity procurement but duty of care and risk management procedures are likely to receive greater attention.
Most likely this will be mostly implemented in international trips, while domestic travel will remain closer to local custom and practice.
The influx of foreign airlines as well as global travel service systems will undoubtedly push this more into the direction of globally practiced travel procedures. This is still in its early stages, but ultimately, the effect will be that travelers will have a greater choice.
Is China ready for this?
What has taken a certain time to reach maturity in the west goes much faster in China. That, in fact, is contrary to Chinese mentality where, traditionally, things tend to take a long time.
By sheer necessity, the Chinese business travel market is being forced to explore new avenues and it is forcing people to break traditions.
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