Chinese business travel spending will experience strong double-digit growth in the coming years, and is likely to surpass the US by 2015, a new report has forecast.
The ‘Business Travel Outlook: China’ report by the Global Business Travel Association (GBTA), said that based on an annual GDP growth of 8.2% in 2012 and 8.9% in 2013, business travel spending is expected to surge 17% in 2012, and then by a further 21% next year, to exceed US$244 billion. The domestic sector will account for US$233 billion of this total, with international spending hitting US$11.9 billion – 27% more than in 2012.
“China’s business travel expansion has been phenomenal,” the report stated. “Generally in lockstep with increasing manufacturing output, trade growth, job gains, business formations, and infrastructure investment, business travel has evolved into a key contributor and benefactor of Chinese economic growth. The total of domestic and international outbound business (IOB) travel spending grew by a whopping 16.5% per year from 2000 to 2011. Some of this reflects price gains, but the bulk of this expansion has come from significant increases in both transient and MICE business trips and rising real spend-per-trip.”
US business travel spending reached US$251 billion in 2011 compared to China’s US$182 billion, but the rate of growth in the US is just one third that of China. This led the GBTA to forecast that China’s business travel spending would exceed that of the US “as early as 2015”.
Other global business travel markets trail way behind, the third place Japan seeing business travel spending of just US$65 billion in 2011, ahead of the UK (US$38 billion) and Germany (US$35 billion). South Korea is Asia’s third largest market at US$30 billion.
The report noted that a key reason for the growth of China’s business travel sector is the increase in supply. A key constraint on business travel growth during the 2000-2011 period came from inadequate infrastructure, the GBTA said, but the recent expansion projects at key airports such as Beijing Capital, Shanghai Pudong, Shanghai Hongqiao and Guangzhou Baiyun have resolved many of these issues. Many of China’s second and third tier airports have also doubled or tripled capacity since 2000 and plans are in place for the development of approximately 100 new airports over the next decade.
The report also forecast that air fares are likely to grow faster than the Chinese rate of inflation for 2012 and 2013, “somewhere in the 6-10% range”.
In the hotel sector, room supply has risen dramatically in China’s major business centres, but the GBTA noted that second and third tier markets “remain constrained”. It expects average daily room rates to rise 4-6% range in 2012 and 2013.
“The global economy (and China) appears to be slowly emerging from those doldrums,” the report said. “China’s business travel spending will reflect the slow restart (and risk) of the global economy. Domestic travel will recover sooner and more strongly than international outbound. The former will benefit from likely government fiscal intervention in 2012 and 2013, as well as stronger domestic demand. IOB will get back on a stronger growth track later in our forecast horizon, in lockstep with our expectations for global trade.
“GBTA expects Chinese business travel spending to increase by nearly 17% in 2012 to US$202 billion. The following year will see travel spend accelerate, expanding by just over 21%. Some of this growth will come from rising travel prices, perhaps as much as 6-8%, but most represents real increases in trip volume and spend-per-trip,” the report added.
