Business travel market takes off

The world has witnessed China's rapid economic development over recent decades, evidenced by its strong gross domestic product (GDP) growth. China's GDP grew by 9.9 percent in 2005 and 10.7 percent in 2006.

While the Chinese economy is enjoying robust growth, the business travel market is also booming, with double-digit annual growth bringing China level with the leading mature markets in Europe.

Corporations in China spent $7.41 billion on air travel in 2005, making China the fourth-largest business travel market in the world after the United States, Japan and Germany, according to the 2006 China Business Travel Survey (The Barometer) announced by American Express during the China Business Travel Forum (CBTF) in Shanghai in October last year.

According to the Barometer on travel and entertainment (T&E), business travel growth in China is largely driven by the domestic market as 28 percent of the surveyed organizations reported an increase in their T&E expenditure and 87 percent of these expenses occurred on the Chinese mainland and Hong Kong.

T&E has become the second-largest controllable cost for organizations, accounting for 24 percent of total controllable expenses, with the first being salaries (51 percent) and the third being information technology (15 percent).

Meals and entertainment remained the largest expense category accounting for 42 percent of total T&E expenditure, followed by air travel (24 percent).

T&E is also considered an investment by companies to acquire new clients (53 percent) or maintain existing business relationships (47 percent).

The Barometer also revealed the growing importance of travel management practices in China.

Corporations in China are also becoming more conscious of the need to exercise prudent cost control over their T&E expenditure. Companies are keen to learn how to maintain effective control and optimization of business travel activities so that they can fully maximize savings.

The Barometer also explained the outlook of the business travel market for 2007.

Almost a third of organizations expect further growth of their T&E expenditure this year. Thirty-three percent of manufacturing organizations as well as 31 percent of service industries expect their business travel budget to increase.

Besides, the domestic market will continue to drive the growth in T&E expenditure, with 41 percent of organizations citing continued business development in China as the reason for the expected increase in T&E expenditure in the next 12 months.

The Barometer findings indicate the enormous growth potential of the business travel industry.

Business travel is an investment. It is therefore critical for corporations to develop or streamline their business travel policy to minimize costs and turnover. Reducing or minimizing these costs, while continuing to achieve the best-value return on investment, will continue to be a commercial imperative. Through effective T&E programs, companies can save up to 25 percent on their business travel expenses.

The author is vice-president of American Express and general manager of CITS American Express Business Travel. American Express is well poised to capitalize on the growth opportunity of the business travel industry and assist companies by providing world-class business travel management solutions

(China Daily 03/07/2007 page19)