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Companies based in China and multinationals doing business there are rapidly adopting such travel management tools as online booking systems to mitigate a forecasted increase in 2008 travel and entertainment expenditures, according to an annual study of China's business travel market by American Express Business Travel. The survey of 230 Chinese and foreign companies found that T&E represents the second-largest controllable cost for companies doing business in China.
More than half of responding companies, 54 percent, expected to spend more on business travel in 2008 than they did this year. An underlying cause for the increase evidently will be higher volumes; the percentage of employees going on business trips rose from 28 percent in 2006 to 33 percent in 2007, and 60 percent of employees are generating T&E expenses in 2007, compared to 56 percent in 2006, according to the survey. The survey was conducted between May and August by Research International on behalf of American Express, covering companies with at least 100 employees and locations in Beijing, Shanghai or Guangzhou. Of the 230 companies surveyed, approximately 12 percent were American Express Business Travel customers.
As in the United States, most Chinese business travel is domestic, according to Amex. Nearly 70 percent of T&E spending took place within China, according to the survey. Meals and entertainment garnered the largest portion of that spending, followed by air travel and lodging.
Companies in China are also increasing their focus on controlling T&E expenses. Eighty-one percent of respondents had a T&E policy in place in 2007, compared with 70 percent in 2006. In addition, 93 percent of surveyed companies have rules on which hotels employees may use for travel, with the same percentage saying they have rules on which airlines employees may use. Both findings represented an increase from last year.
One of the more noticeable trends uncovered by the survey was the use of travel technology. This year, 61 percent of respondents said their companies use online booking tools, compared with 37 percent in 2006.
The vast majority of companies in the survey also said they measure the effectiveness of their travel programs--86 percent had such metrics in place in 2007, compared with 69 percent a year earlier.
"We are impressed by the strong growth momentum of business travel in China, and its rapid pace in developing into a managed business travel market," according to a prepared statement from Gregor Lochtie, vice president and general manager of American Express Business Travel in Greater China. "We saw that companies operating in China have paid more attention than before to look for opportunities to optimize and control their T&E expenses, an investment that can improve their bottom line."
According to Amex, the survey revealed room for improvement. Though nearly half of all respondents use a travel agency for travel management services--compared with 34 percent in 2006--foreign-owned entities are more likely to use TMCs than Chinese-owned companies. Furthermore, only 15 percent of those surveyed had consolidated business travel with a single TMC.
"The main selection criteria remain the competitive price for each ticket bought, with national coverage being the second most important criteria," Amex said.
Another element holding back the development of managed travel in China, Amex suggested, is the heavy use of cash. Use of corporate cards actually declined in 2007 from 2006; only 7 percent of the companies surveyed used a corporate card for business purposes. The survey report gave no indication as to which brands have been selected.
Beyond the three major business centers of Beijing, Shanghai and Guangzhou, development of managed travel has been slow, said Kevin Ruffles, regional president of Europe and Asia Pacific for HRG. Overcoming challenges related to payment, technology and culture could take years for companies in China, he suggested. Reconciling senior management expectations for quick development with the slower pace of reality, Ruffles added, is one of the toughest aspects of the market for travel managers at multinational companies.
"There's a perception in corporate travel that if it works in North America or Europe, then it will work in Asia, and sadly that's not always the case," Ruffles said.
China has the manpower needed to modernize airports and develop high-speed rail and other travel industry infrastructure, once the government makes it a priority. However, Chinese leaders take a long-term view of the market, Ruffles said, thinking of development in terms of decades, rather than year by year. "Patience and persistence are the virtues there in the Chinese market," he said. "You need to invest time in relationships."
Moreover, government authorities control the Chinese global distribution system, TravelSky. "It has very limited functionality and there is an awful lot of manual intervention to get some of the data through in a format that we enjoy in the West," he said. "So don't assume that if something works in the West, it will work [in China]. Maybe it will some day, but not tomorrow."
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