Beijing to Gain Delayed U.S. Air Lift

The World Bank this month increased its gross domestic product growth projection for China to 9.5 percent, a rise from the 8.7 percent growth the country experienced in 2009 despite a global economic downturn.

The continuing economic muscle, which is expected to make China the second-largest economy in the world behind the United States, has driven visitor numbers to the country's capital city to continue to surge.

To meet that business demand, airlines, including those serving direct routes to and from the United States, are adding seat capacity and initiating Beijing services, many of which carriers deferred to 2010 as an impact of greatly reduced demand during the economic slump.

In late November 2009, Beijing Capital International Airport's passenger throughput surpassed the 60 million mark, making the airport the largest in Asia and the fourth-largest in the world in terms of passenger arrivals, according to airport statistics. In the first two months of 2010, throughput increased 8.2 percent year over year. The airport is expected to surpass 65 million passengers by year-end.

Those numbers will be aided by the influx of passengers traveling to and from the United States. American Airlines is launching its lone direct route to Beijing from Chicago in the first half of the year, which will add 16,302 seats in its first six months of service, compared with on the route where United Airlines' 46,700-seat capacity on the route. American in 2009 deferred its service until the first half of this year. US Airways in June 2008 filed a one-year extension with the U.S. Department of Transportation to delay its Philadelphia-Beijing launch to March 2010. In November 2009, the carrier gave up its right to serve Beijing.

Meanwhile, Delta Air Lines is launching service with morethan 4,000 seats for the half year on the Seattle-Beijing route, where it will compete with route leader Hainan Airlines. Air China, which operates the single direct service to the city from New York's John F. Kennedy International Airport, is increasing its seat capacity slightly by about 1,000 to 2,000 seats each in Los Angeles, New York and San Francisco. San Francisco-Beijing also will see a boost in the first half of the year from United Airlines, which is adding 11,000 seats, 23.6 percent more than in the first half of 2009. United, however, is reducing service on its Washington Dulles-Beijing route 32.1 percent, giving the market about 12,000

fewer available seats in the first half of the year. With business coming back and China's economy continuing to grow at a rapid pace, fares are expected to rise as well. The economic rebound eventually could create a "situation where demand outstrips supply," said Egencia vice president of supplier relations Noah Tratt. HRG China general manager Harald Weber-Liel said that ticket prices are expected to rebound to 2008 levels, following the 6 percent domestic and 12 percent to 15 percent international decreases in 2009. Meanwhile, hotel demand is far from overtaking supply as the city saw a flood of tens of thousands of new hotel rooms to meet the demand of the 2008 Beijing Summer Olympics, but construction did not cease after the games.

Notably, the China National Convention Center in November 2009 opened in the city. The 5.3 million-sq.-ft. structure is the country's largest conference venue. The center is linked to the CNCC Grand Hotel and a 337-room InterContinental Hotels Group property.

The increase in supply has left a considerable occupancy gap that hotels need to fill, so buyers can expect a favorable market, at least in the near term. Beijing hotel occupancy resided in the 50 percent to 60 percent range in the fourth quarter of 2009, according to Smith Travel Research.

Asian hotels have been offering discounts and amenities recently that have not been seen since the outbreak of SARS, said FCm Travel Solutions executive general manager of Greater China David Fraser, who added that some of the higher-tier properties have been holding their rate integrity by not offering such deep discounts.

Tratt said Egencia's Beijing average daily rate projections for this year have been holding true even with a strong increase in domestic travel demand, which should not significantly impact international corporate travelers.

"International travelers tend to focus on branded hotels in a city like Beijing," Tratt said, "so the domestic demand is not going to sop up all the hotel rooms international travelers would gravitate toward."