China surpasses USA in money spent on business travel 2015

Published on : Monday, May 2, 2016

Chinese business travellersChina has surpassed the USA in the amount of money spent on business travel, and industries ranging from plane makers to hotels to luggage companies are clamoring for a foothold in the massive new market.

 

 

In 2015, business travel spending by the Chinese reached $291.2 billion compared with the $290.2 billion spent by their American counterparts, according to a report from the Global Business Travel Association.

 

 

Travel spending by Chinese companies is likely to continue rising this year, increasing 10.1% to $320.7 billion vs. the 1.9% uptick to $295.7 billion spent by U.S. companies.

 

 

“I think it’s game changing,” says Michael McCormick, the GBTA’s executive director and COO. “It’s a significant milestone and a change in the order that we’ve basically had since we’ve been tracking business travel.”

 

 

Ninety-five percent of that corporate travel spending occurs inside China, McCormick says. Companies are eagerly chasing those dollars.

 

 

In March, Hilton Worldwide opened its second China-based Hampton by Hilton hotel in the city of Guangzhou. It will be the flagship property for a chain that will see at least 10 more hotels open in China this year, and there are roughly 30 more in the pipeline. Hilton has partnered with the Plateno Hotels Group, a Chinese hospitality company that it says has the largest loyalty program in China.

 

 

“At some point … China will be the largest lodging market’’ in the world, says Jim Holthouser, executive vice president of global brands for Hilton Worldwide. Though Hilton has had a presence in China for 30 years, he says, “in the last decade, we’ve really put a concentrated growth strategy in place.”

 

 

In addition to having roughly 70 hotels in China, and planning more than 200, Hilton has a program focused on Chinese visitors to 100 of its hotels in other parts of the world. The “Huanying” or “Welcome” program ensures a Mandarin speaker is at the front desk, a welcome note in Mandarin is left in the guest’s room, Mandarin programs are available on TV and Chinese dishes such as congee are featured on the menu.

 

 

“The program is important for us to capture as much business coming out of China as we can,” Holthouser says.

 

 

IHG, whose brands include Holiday Inn and Crowne Plaza, opened 32 hotels in China last year, and as of December, had 265 properties there with more than 85,000 rooms.

 

 

In 2012, it launched a China-based chain called HUALUXE, which it plans to expand to cities such as New York and London to cater to Chinese visitors. Like Hilton Worldwide, last April, IHG began its “China Ready” program, an initiative at hotels in more than 20 countries that aims to make Chinese travelers feel at home while abroad, featuring multilingual staffers and other amenities.

 

 

Boeing estimates that China’s massive need for new planes to ferry its business travelers and growing middle class will make that country Boeing’s biggest buyer of commercial aircraft over the next 20 years.

 

 

“China has an incredibly dynamic aviation industry because of the rapid growth of the middle class, tourism and business travel in a country with more than a billion people,” Boeing spokesman Doug Alder says. Yearly per capita travel in China is roughly 0.24 plane trips per person vs. the 2.4 trips per person in the USA, he says. “This helps to explain both the rapid growth of air travel in recent years and enormous room for growth.”

 

 

Last year, Chinese customers took delivery of roughly one-quarter of the commercial aircraft that Boeing produced.

 

 

Boeing projects that in the next two decades, China will require 6,330 new aircraft, valued at more than $950 billion. “Boeing is working to increase our market share,” Alder says, “and we will continue to collaborate with partners in China to support our market access and sales opportunities.”

 

 

Samsonite has increased the number of locations in China and Hong Kong where consumers can buy its business bags and luggage from roughly 800 in 2010 to more than 1,000 in 2015. The luggage maker has enlisted Chinese celebrities as brand ambassadors for marketing campaigns. Last year, 13.6% of company’s total net sales came from China, Hong Kong and Macau.

 

 

“The ongoing growth of business travel in China represents a considerable opportunity for Samsonite,” Ramesh Tainwala, Samsonite’s CEO, said in an emailed statement.

 

 

China’s slowing economy may lead to a slightly lower increase in business travel spending in 2017. The GBTA forecasts a 9.8% rise. Still, McCormick says, “the 9% for any other market would be an enviable number … explaining why in such a relatively short period of time, China has overtaken the U.S. as the leader in business travel spending with really no end in sight.”

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