With its booming economy, foreign companies are proliferating their presence in China—where a market much different from that in the United States is yielding a new set of challenges for corporate travel managers. Yet, loosened regulation in such sectors as airline, booking and reservations and banking and credit card are making the country more open to competition among corporate travel suppliers and cooperation with travel buyers.
Historically, all airlines in China were regulated by the Civil Aviation Administration of China, yet recent changes now allow airlines to set their own fares. Also, just last month, the CAAC allowed investors to start the country's first private airline company. While a shift in the regulatory environment enables corporate travel buyers to negotiate with national carriers, some buyers said carriers remain somewhat reluctant to negotiate.
"The air industry in China is very new and negotiating a deal takes time," said Intel global sourcing manager Megan Stowe. "However, as more corporates negotiate, the easier it is becoming."
Intel is among the many U.S.-based companies that have boosted their presence in China is recent years. Since 2003, the company has doubled the number of employees in the country—now totaling more than 4,000 people spread across 18 sites, Stowe said.
Just as the negotiating climate has yet to mature within China, the country also has been slow to adopt e-ticketing on domestic flights, usage of which is limited. Yet, e-tickets on domestic fares will be mandatory by 2007, when airport infrastructures are scheduled to be upgraded, said Mike Bezer, Carlson Wagonlit Travel vice president of Asia/Pacific sales and account management.
When it comes to reservations systems, China is a monopolistic market. TravelSky is the predominant global distribution system and the only legal ticketing system in the country. Although China's accession to the World Trade Organization eventually will open the country to foreign GDSs, a timetable has yet to be set, according to Bezer. "There are rumors it could be this year, but it's unclear when," Bezer said.
While consumers in the country have been receptive to online booking, corporate-specific booking tools are only a recent addition in the country.
American Express in April launched American Express Online, a booking tool for companies with travelers based in China, leveraging a partnership with TravelSky. Citing "explosive growth" in the Chinese business travel market—both among China-based companies and multinationals—Amex president of global travel services Charles Petruccelli said it is the first corporate-specific booking tool in the market.
"Currently, many China-based companies are seeing their travelers book online using consumer travel solutions, undermining the cost savings that a corporate travel management policy is intended to deliver," said Pierric Beckert, Amex senior vice president for corporate services in the Asian region, in a press statement. "American Express Online will help China-based companies increase online adoption and keep corporate travelers booking within the company program."
Through a three-year agreement, TravelSky will be American Express' exclusive GDS partner in the country—even if other GDSs enter the market.
Meanwhile, though charge cards long have been the currency of U.S. corporate travelers, China—with a lower rate of merchant acceptance—remains a cash society. According to research conducted by Visa International, China has an estimated 20 million merchants, of which only 350,000 to 400,000 accept cards, primarily those locally issued by the China UnionPay national payment system. While U.S.-based card companies build acceptance and ramp up dual currency corporate offerings in the country, largely through partnerships with local Chinese banks
(BTN, June 21, 2004), comprehensive payment penetration and its corresponding data remain elusive.
Although hotels and airlines based in the country have embraced charge cards as forms of payment, acceptance among other T&E vendors—namely restaurants—remains shallow when compared with Europe and the United States. This becomes even more significant when considering that meals and entertainment remain the largest T&E category by large margins among the locals—comprising 39 percent of total T&E expenditures, according to American Express research.
Despite the challenges posed by the burgeoning market, companies based in China—as well as their travelers—are becoming more receptive to the concept of travel management.
American Express, during an April China Business Travel Forum in Shanghai, released a survey on travel and expense practices in the country based on the responses of 150 companies with 50 or more employees across five industries.
Amex said travel management practices among large companies are becoming more structured. "Travel policies, when they exist, are being reviewed in a more formal manner than before," Amex said in a statement. Fifty-five percent of those surveyed said they follow a formally written T&E policy and 23 percent of organizations said they would adopt online booking tools within the next year.
Although the country offers a host of complications in managing travel, there are more corporate travelers than ever before. Since 1994, inbound travelers to China have jumped from less than 44 million to about 109 million, according to Wei Xiao-an, researcher at Tourism Research Center at the Chinese Academy of Social Sciences.
Bezer, during a presentation at the Association of Corporate Travel Executives annual conference in Vancouver last month, said that 10 years ago, business travel comprised about 10 percent of the market, while today the number has spiked to 40 percent.
As such, many peg China as the fastest-growing corporate travel market. Amex's Beckert said business travel in China is a $6 billion industry and has been growing 25 percent year over year.