The American Express Global Business Travel 2014 China Business Travel Barometer also shows that more people are recognizing the importance of safety and comfort for business travelers.
Shanghai, December 2, 2014 /PRNewswire/ -- Slower economic growth in China and increased compliance costs have led to lower-than-expected travel expenditure in 2014. Although business leaders predicted a 4.3% increase for the year, actual business travel spending has only grown by 1.6% year-to-date. Despite the many challenges ahead, business leaders and tourism executives remain optimistic, with their travel budgets expected to increase by an average of 3.5% in 2015.
Opening ceremony of the 2014 China Business Travel Forum
These conclusions come from the 2014 China Business Travel Survey Report (aka the Barometer), released today at the 10th annual China Business Travel Forum held in Shanghai by American Express Global Business Travel. The Barometer is an annual report detailing the current state and forecasts of China’s business travel market. The 2014 Barometer surveyed executives from 230 companies with more than 100 employees, located in economically developed areas of China such as Shanghai, Beijing, Guangzhou, Shenzhen, and Wuhan. Of these, 82% were Chinese companies, with the remainder being joint ventures or foreign-owned enterprises.
According to the Barometer, fewer companies plan to increase their travel budgets in 2015 (34%), compared to 40% in 2014 and 49% in 2013. Larger companies appear to be more conservative than smaller ones. On average, small companies with fewer than 200 employees expect a 5% increase in travel spending, while larger companies anticipate only a 2.5% rise.
International travel is growing in popularity
More company employees are traveling on business. According to the Barometer, an average of 38% of company employees traveled for work this year, up from 33% in 2013 and 28% in 2012. Not only has the number of business travelers increased, but the Barometer also shows that in 2014, the percentage of travelers going abroad exclusively or both domestically and internationally rose by 3%, reaching 36%. The proportion of those traveling solely abroad grew from 8% two years ago (2012) to 13%. With 34% of surveyed companies planning to expand overseas operations within the next three years—up from 19% in 2012—the number of outbound business trips is likely to continue rising.
Vice President of American Express Global Business Travel and General Manager of CITS American Express Business Travel Marco Pellizzer said: "Despite concerns about China's slowing economic growth and rising operating costs, company leaders remain optimistic and continue to recognize the value of investing in business travel. There are clear signs that Chinese companies are expected to increase their travel budgets again next year. In addition, there are indications that corporate leaders are increasingly shifting their focus beyond China, expanding manufacturing operations or increasing marketing and sales efforts internationally."
Focus on hotel spending
This year, airfare accounted for 23% of average travel expenses, down from 25% in 2013 and 33% in 2012. In contrast, hotel accommodation expenses increased by 2%, making up 23% of the average travel cost.
Mr. Pellizzer said: "Compared to other types of travel, airfare for business travel has been decreasing over the past few years, a trend similar to what has been reported in Europe. This year, companies are placing greater emphasis on using 'the lowest reasonable fare,' with slightly higher usage of economy class over first class in certain regions and routes. Additionally, train travel is becoming increasingly popular among business travelers in China."
Recognizing the fact that hotel expenses account for an increasingly large proportion of travel costs, more companies (83% in 2014, compared to 78% in 2013) have negotiated accommodation rates with multiple hotels or hotel chains in hopes of reducing costs.
This year, travel managers have been working to promote the use of corporate negotiated rates across all types of travel, further driving down costs. When asked about the most important ways to optimize travel budgets, "increasing the use of preferred supplier services" ranked first—a significant jump from fifth place last year. "Discounted fares," "less flexible ticket options," and "advance bookings" remained high on the list.
Focus on travelers
Regarding the focus of travel management over the next three years, the report ranks "traveler safety" as the top priority. In 2014, several high-profile travel incidents, political instability in certain countries, and disease outbreaks around the world significantly heightened travel managers' awareness of their responsibility for traveler safety. In addition, "traveler satisfaction" jumped to fourth place among key concerns this year, compared to sixth place last year.
Actively communicating with travelers and emphasizing the importance of adhering to travel policies has also become more crucial this year. When asked about the most effective way to ensure traveler compliance with travel policies, respondents ranked "active communication and promotion" first, above "more mandatory approaches" such as "centralized travel program management" and "executive sponsorship," which ranked first and second, respectively, in 2013.
The value of business travel
The perceived value of business travel appears to be increasing, with 33% of surveyed organizations stating that they consider travel a strategic investment—up from 25% two years ago. This perception is especially strong when executives are based in China (34%), compared to when they are based abroad (26%).
As for the main purposes of business travel, most seem to be client-oriented. In 2014, 23% of business trips were for maintaining existing client relationships, and 23% were for developing new clients. Corporate incentives and seminars (10%) as well as internal meetings (14%) were not the most common reasons for business travel.
Mr. Pellizzer concluded: "As the domestic and international business environments become increasingly complex, corporate leaders continue to recognize the importance of travel and the return on investment it can bring to their businesses. Although corporate leaders predict a 3.5% increase in travel budgets next year, it is clear that they are still striving to maximize the ROI of their business travel investments. Companies should continue to work with travel professionals and TMCs who can provide policy advice, help negotiate favorable rates, offer insights from reports and data, and assist in achieving efficiency in travel programs."