Seat 2B By Joe Brancatelli
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The China Travel Syndrome
February 5, 2015 -- It's China's world now and the rest of us are just traveling in it.
Having already achieved the largest rural-to-urban migration in recorded history, Chinese travelers are expected to surpass U.S. business people next year as the world's biggest spenders at airlines and hotels. The numbers, and the trend lines, are staggering.
According to the Global Business Travel Association, Chinese business-travel spending jumped 15.9 percent last year, more than twice the country's overall economic growth rate. Spending on airlines, hotels and other business-travel necessities is expected to grow by 18 percent this year, pushing total Chinese business-travel spend far beyond the $262 billion registered in 2014. That'll make Chinese business travelers the global leaders, outpacing U.S. travel spending, which is growing by a comparatively small 4.5 percent a year.
Don't think the travel industry hasn't noticed. They are rushing across the Pacific with bushels of additional flights and hundreds of new hotels. The breakneck expansion is hard to express just by the numbers. A little color is required.
All these rooms could easily be filled by Chinese business travelers, but U.S. and Chinese carriers are opening routes to major gateway cities around Greater China. The new flights will not only serve U.S. travelers doing business in China, of course, but also the mad rush of outbound Chinese travelers.
As United Airlines vice chairman Jim Compton recently noted, the World Travel Organization once predicted there would be 100 million outbound Chinese fliers by 2020. Now the WTO thinks that number will be reached this year. The new prediction for 2020? Two hundred million Chinese flying to destinations around the world. That means a stampede to expand flight options between China and the United States.
If most U.S. business travelers still focus on the Big Three Chinese destinations--the capital of Beijing, the financial center of Shanghai and Guangdong province bordering Hong Kong--"there is really good, double-digit growth to secondary cities," says Tom Owen, senior vice president of the America for Cathay Pacific. "China is throwing up all kinds of new traffic."
Cities such as Nanjing, Wuhan, Ningbo, Quindao and Chongqing are all experiencing rapid expansion, which is good for Cathay Pacific since it serves nearly two dozen Chinese cities in partnership with its Dragonair subsidiary. It's also what's driving Hilton's decision to partner with Plateno and build out the Hampton Inn chain in China.
"China's hotel market has had pretty simple segmentation up until now," explains Jim Holthouser, Hilton's executive vice president for global brands. "There are five-star international hotels in the major cities and there are half-star properties in most other places. The three-star space is just starting to emerge. U.S. business travelers want properties such as Hampton and locals want something more, too."
It's a mistake, however, to think that only Western companies can bring higher standards to China travel. The Chinese consider Western brands aspirational and luxurious, of course, but Hainan Airlines is proof that a local firm can do world-class quality. Hainan, which launched U.S. service in 2008, is one of only seven carriers in the world with a five-star Skytrax ranking. The agency's top-rated global airline? Cathay Pacific.
"Hainan is a boutique kind of brand," says Joel Chusid, Hainan's Seattle-based executive director of North America. "It's well-respected among Chinese people and Chinese business people working in the United States. But we're just now becoming known to [U.S. business travelers] and we're doing it with word-of-mouth from fliers who like our product."
Where the China business travel market goes from here is anyone's guess. The reason? Growth is coming from so many unique segments. One example: Chinese students flooding into U.S. colleges. Owen of Cathay Pacific says the college market is one of the reasons Cathay chose Boston as its next nonstop destination from Hong Kong.
Another travel driver? The new visa regimen between the United States and China. After decades of difficult-to-secure, one-off visas, the two countries agreed last fall to sweeping changes. Travel visas can now be issued for as long as 10 years.
"The extension of the Chinese visa program...was unexpected," says Glen Hauenstein, executive vice president of network planning at Delta Air Lines. "We've [already] seen a significant increase in demand from China."
The visa change "is a big deal," agrees Holthouser of Hilton. "One of the reasons to build in China is the outbound market. If you capture the Chinese traveler at home, they'll consider you when they travel overseas. In the years to come, that will impact your performance around the world."This column is Copyright © 2015 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2015 by Joe Brancatelli. All rights reserved.