Tuesday, 8 November 2016

CHINA: Business Travel Spending Is Expected To Grow 9.2 Percent This Year

According to a forecast out this week from the Global Business Travel Association’s education and research arm, business travel spending in China is expected to grow 9.2 percent this year to nearly $318 billion.

Next year, spending is forecast to increase by 8.4 percent to reach $344.6 billion. While still robust, those increases are lower than the market saw in 2015, when spending grew by 11.4 percent.

The forecast was a slight downgrade from the previous outlook, the third period in a row that the forecast has been lowered as the economy’s expansion cools.

“While the projected growth rates are relatively slow for China, they still represent tremendous growth,” Michael McCormick, executive director and chief operating officer of GBTA, said in a statement. “We expect longer-term spending growth to continue to moderate until Chinese policymakers can achieve their goal of rebalancing the economy and diverting resources away from investment and towards consumption.”

China became the world’s largest business travel market last year, when spending topped that of the U.S. by $7 billion. Next year, business travel spending in in the U.S. is only expected to reach about $293 billion, $51.5 billion lower than the total in China.

Business travelers in China are spending the bulk of their money on trips within the country according to the report; domestic business travel makes up more than 95 percent of spending.

“The growth in China’s international outbound market has been outpaced by its domestic market over the last five years,” the report says. “The differential has mainly been driven by lower volumes of business travel to Europe and the United States and, over the last year or two, slowing volume growth to emerging markets, particulary Brazil and India.”

No one in the travel or hospitality industries wants to miss out on the incredible billion-dollar opportunity that is the gigantic Chinese travel market, and Marriott International is no exception.

To do just that, the company is not only looking to expand its portfolio of hotels in the region, but it also wants to establish more of a digital connection to Chinese travelers too, primarily through the use of WeChat, Alipay, and its own Marriott Rewards mobile app.

“As Chinese travelers continue to take their travel aspirations further, we need to grow with them and understand what they want, and how we can meet their needs,” said Peggy Fang Roe, chief sales and marketing officer, Asia-Pacific for Marriott International. “What we’re most proud of is how we have utilized the social platform WeChat — China’s most popular messaging app — to make guests’ lives easier.”

Pointing to research compiled by the Hurun Research Institute for a Chinese Luxury Traveler 2016 study, commissioned by Marriott, Fang Roe said “Chinese travelers are very tech-savvy.”

“Young, affluent travelers in China prefer electronic and digital guest services. Hence, we now offer our members the opportunity to connect with Mandarin-speaking concierge service assistants via WeChat at any stage of their travels, as part of the Li Yu program,” Fang Roe noted.

The Li Yu program debuted as a pilot in 2012. At the time it offered just a few services, such as Chinese-language communications and in-room entertainment, the addition of Chinese menu items in hotel and in-room dining, bathrobes, slippers, and room assignments featuring the numbers “6” and “8” (because they’re considered lucky).

Marriott wasn’t alone at the time, either. Its peers, including Hilton and Starwood, also launched similar Chinese traveler hospitality programs.

Today, four years later, however, those programs have evolved, becoming much more technologically savvy, insightful and no longer just about food preferences.

The WeChat concierge, for example, is available for Chinese guests to message no matter where their travels take them around the world, and the Li Yu program itself is now available in 41 hotels worldwide in cities that include Paris, London, Dubai, Tokyo, Osaka, Seoul, and Bangkok.

Additionally, Marriott is communicating with Chinese guests via Weibo and the company’s own Marriott Rewards app. Chinese travelers can also pay via Alipay at select hotels in China and throughout Asia, something Marriott launched last year.

Credit cards and debit cards are the most popular payment method for travelers across the globe, but recent data proves that times are changing. Worldpay, a leader in the electronic payment services industry, recently surveyed 12,000 people in six different countries who’ve booked a flight or a vacation package in the last year, to better understand why people pay the way they do.

The findings revealed that global travelers are embracing alternative payment methods for travel more than ever. And travel industry providers have no choice but to adapt to the growing trend, or risk alienating the technologically savvy traveler of the future.

When booking vacation packages, travelers in the United States, Australia, and Brazil, overwhelmingly choose to pay with credit cards — 76%, 62%, and 57%, respectively. Credit card payments remain dominant in countries such as India, China, and Germany as well, but travelers in those countries have a higher tendency to pay with debit cards and alternative methods such as PayPal and online banking accounts.

The same can be said for airline travel purchases. Travelers in India, China, Australia, and Brazil use their credit cards for travel packages nearly as much as they use them for airline tickets. Countries like Germany and the U.S., however, saw slightly different trends. For example, 50% of U.S. travelers booked airline travel with credit cards, compared to the 76% of travelers that purchased vacation packages with credit cards. In Germany, credit cards are more likely to be used for airline travel, 58%, than travel packages 34%.

Younger generations have always been quick to adopt technology sooner than older generations, making it no surprise that travelers ages 18-25 are less likely to use credit cards and more likely to embrace alternative payment methods than older generations.

On the opposite side of the spectrum, credit card payments are a significantly more popular form of payment for travelers over the age of 66 than any other age group when booking a travel package, regardless of country.

Travelers 18-25 are also more likely to pay for vacations and flight tickets using their savings rather than credit cards — most likely because of the limited access they have to credit cards

While 18-25 year olds make up the smallest group of travelers booking airline travel with credit cards, the percentage of adults using credit cards remained relatively similar across the board in countries like Germany, Brazil, Australia, and the United States. China saw a significant jump in credit card usage among those between the ages of 55 and 65, while India saw a spike in travelers 66 and older.

Just because most travelers opt to use their credit cards to pay for travel, doesn’t necessarily mean it’s their first choice. In fact, 95% of people who said they prefer using credit and debit cards also said they would use their country’s most popular alternative payment method if given the choice.

Countries like Germany, Australia, and China have already seen large percentages of travelers opting for alternative payments such as PayPal and Alipay — most of those travelers were between the ages of 18-25. In Germany, 35% of travelers in that age group purchased a flight using PayPal, with nearly 30% using the alternative method when booking travel packages.

Surprisingly, 56-65 year olds in India led the pack with alternative payments — nearly 30% of travelers in India opt for e-banking when booking airline tickets. In India, access to credit is closely linked to one’s income, explaining why credit card usage is low between younger and older audiences.

As travel costs continue to increase, the ability to pay for vacation packages all at once becomes more difficult for travelers across the globe, making installment based plans more attractive than ever. Worldpay’s survey found that 75% of respondents would pay for their vacation packages in installments if given the option. Eighty-five percent of respondents from Brazil prefer installment based plans, given it’s the cultural norm for Brazilians to do so.

India and Australia also saw an overwhelming desire for the option with 90% and 76% of travelers embracing the idea, respectively. Outside of Brazil, the demand waned when travelers were asked about paying for airline tickets with installment plans.

The pace of technology will prove to be a driving force in travelers embracing alternative payment methods in the future. Younger generations are already opting to use methods such as PayPal, Alipay and installment plans to pay for travel.

In the future, it won’t be enough to simply offer travelers payment methods that they’re accustomed to. If travel industry providers want to gain an edge on the competition, they’ll need to start listening to what their customers want and offer them the payment methods they prefer.
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