China Eases TMC Restrictions
Chinese tourism and travel agency regulatory authorities this month lifted some restrictions on foreign ownership, capital startup investment and outbound bookings, making it possible for foreign travel management companies to own more than 51 percent of a Chinese travel agency and open local branches.
The new rules significantly reduce entry capital requirements to operate at the Chinese point of sale, making it easier for foreign agencies to acquire international ticketing licenses, but they still are mostly prohibited from owning and operating domestic ticketing licenses.
In most cases, foreign TMCs must maintain some level of a joint venture with a local partner to fulfill domestic ticket requirements, but the market opening lets foreign-owned TMCs test the new frontier.
FCm Travel Solutions was the first to publicly make a move. The Australia-based TMC announced an increase in its ownership stake in its mainland China partner to 95 percent. FCm purchased its joint venture share of China Comfort Travel in 2004, which FCm said was the mainland's third-largest agency at the time. The company, which now has offices in Beijing, Guangzhou and Shanghai, has obtained its own wholly owned international ticketing license and applied for its wholly owned travel agent license in response to the new regulations, according to executive general manager of Greater China David Fraser.
"We plan to open additional offices in our existing cities and explore growth into other major cities," said Fraser. "This is a different strategy than some of our competitors, who often see centralized call centers as the future. We will continue to put offices, teams and staff closer to our customers."
The changes in Chinese regulations are part of China's December 2001 accession agreement to the World Trade Organization that first opened Chinese travel agencies to foreign investment in 2002.
Chinese travel agencies now can engage in outbound travel bookings if the agency has been operating for two years without infringements. Foreign-owned agencies still are prohibited from engaging in outbound booking, except as provided under the Closer Economic Partnership Arrangements governing trade relations between mainland China and its Special Administrative Regions of Hong Kong and Macau.
Berthold Trenkel, Carlson Wagonlit Travel executive vice president of traveler and transaction services and former Asia/Pacific COO, said the lowering of capital requirements and new ownership regulations will not have a profound effect on corporate travel agencies that, in most cases, still need local joint venture partners to fulfill domestic tickets. However, CWT owns its own domestic license, the details of which Trenkel would not disclose. CWT established a 49 percent-owned joint venture with China Air Services based in Beijing in 2003.
American Express Business Travel started the first TMC joint venture in mainland China when it took a 49 percent share in China International Travel Services in 2002. BCD Travel has a joint venture with Shanghai's Jebsen Air Service, which operates as BCD Travel China on the mainland as an extension of a joint venture between BCD and Hong Kong-based Jebsen Travel Management, in which it owns a minority stake.
HRG has a 51 percent ownership joint venture with mainland TMC Jin Jiang International Travel. "HRG was aware of the regulation amendment regarding shared ownership moving forward in China," a spokesperson said. "We are the majority shareholder in the JV and this works very well for HRG. We do not envisage any future changes to the ownership structure."