Corporations in China spent US$7.41 billion on air travel in 2005, making China the fourth biggest business travel market in the world, according to the results of American Express Business Travel’s China Business Travel Survey (The Barometer). Released during the second American Express China Business Travel Forum (CBTF) in Shanghai, findings of the Barometer revealed that T&E has become the second largest controllable costs for organizations accounting for 24% of total controllable expenses.
Findings of the Barometer provided organizations, vendors and suppliers with the latest information of the Travel & Entertainment (T&E) management practices and outlook of the market for 2007 in China. This is the third business travel survey conducted by American Express in China. The last two surveys were announced in 2003 and 2005.
“The Barometer and CBTF demonstrate American Express’ long term commitment to the China market. As business activities increase, companies operating in China look for opportunities to optimize their T&E expenses, an investment that can improve the bottom line of their business. American Express is well positioned to capitalize on this growth opportunity and assist companies with world class business travel management solutions, “said Charles Petruccelli, President of American Express Global Travel Services.
T&E market highlights from this year’s survey included:
? Corporations in China spent US$7.41 billion on air travel in 2005, making China the fourth biggest business travel market in the world after United States, Japan and Germany.
? Among different industries, manufacturing reported the largest business travel spending and growth in 2006.
? The business travel growth is largely driven by the domestic market - 28% of the surveyed organizations reported an increase in their T&E expenditure and 87% of these expenses occurred in mainland China and Hong Kong.
? According to the Barometer, T&E has become the second largest controllable costs for organizations accounting for 24% of the total controllable expenses, with the first one being salaries (51%) and the third being Information Technology (15%).
? Meals and entertainment remained the largest expense category accounting for 42% of total T& E expenditure, followed by Air Travel (24%).
? T&E is considered an investment by companies to acquire new clients (53%) or maintain existing business relationships (47%).
Travel management practices highlights from this year’s Barometer included:
? Business travel management is gaining momentum in China. According to the survey, there are more negotiated rates with suppliers, up 20% since 2004.
? 70% of the organizations have a T&E policy, up 15% from 2005. Traceability, efficiency and cost are the driving forces of the T&E policies
? Compliance is low. According to the survey, only 28% of the organizations comply with more than 50% of the T&E policy. Over half of the organizations surveyed have no control in place.
? According to the survey, about one-third of organizations use a travel agency for their business travel requirements.
? Use of the internet for business travel is not high. Only 37% of organizations reported internet usage. However, over 50% of both the Chinese and foreign owned companies are not considering the implementation of an online tool.
? Payment method evolved slowly. Reimbursement on cash receipts remains the main method of expense payment, with 73% of surveyed companies using this payment method and over half of the respondents had temporary cash advances.
2007 outlook highlights from this year’s Barometer included:
? Almost a third of organizations expect further growth in their T&E expenditure for the coming 12 months - 33% of manufacturing organizations as well as 31% of the service industry expect their business travel budget to increase over the next 12 months
? The domestic market will continue to drive the growth in T&E expenditure, with 41% of organizations citing continued business development in China as the reason for the expected increase in T&E expenditure in the next 12 months.
“Our survey indicates the strong growth momentum of the business travel market. The findings provide valuable information and insights for corporations, suppliers and vendors to review and enhance their current practices that will help enhance the development of the industry. American Express will capitalize on the knowledge and build on our success in the market. We have the core values which corporations are looking for in a travel agency as indicated by the Barometer: global coverage, reliability and quality customer services.” said Petruccelli.
The Barometer survey was conducted by Research International from May to September 2006, interviewing 200 Chinese and foreign owned organizations with 100 and more employees in five key industry sectors in Shanghai, Beijing and Guangzhou.