Companies intensify push for piece of China travel market

By Johanna Jainchill

Temples-ChengduChinaThe Global Business Travel Association (GBTA) released a report last week asserting that by 2015, China is forecast to become the world’s top business travel market, surpassing the U.S.

The report found that business travel spending in China will increase by 17% in 2012 and 21% in 2013, to $202 billion and $245 billion, respectively.

That news came a month after U.S. Travel Association CEO Roger Dow asked Congress to make it easier for travelers from Asia to get through U.S. airports, citing significant delays in customs processing for a critical market.

“Nearly a quarter of the increase in travel exports over the past two years has come from four countries in the Asia-Pacific region: Australia, China, Japan and South Korea,” said Dow. “Collectively, the spending by these four countries in 2011 supported 233,000 U.S. jobs, 14,200 more than were supported in 2010.”

These recent numbers and Dow’s testimony underscore a much bigger theme in the travel industry: the increased and growing focus on the rise of the Asia-Pacific traveler.

Asia-Pacific destinations, especially China, are on the minds of most of the top travel companies in the world. This has been true for quite some time, and especially since the region overtook the U.S. in travel market spend in 2010.

While that growth has been in the works awhile, with more clarity about the region’s economics, and especially the spending potential of the middle-class emerging from China’s 1.3 billion people, travel leaders around the world are becoming more interested than ever in how to tap into it.

The region’s travel boom has been a natural follow to its skyrocketing gross domestic product.

/uploadedImages/All_TW_Destinations/Asia_Pacific/410x232_photos/052912RealGDPGrowth.jpgAccording to a 2011 PhoCusWright report, during the 2009 recession when travel markets around the world declined, China’s grew by 3%; its GDP grew by 9.1%, even as both numbers fell across most Western countries.

In 2009, when the United Nations World Tourism Organization (UNWTO) said that international tourist arrivals and tourism receipts were down 4.2% and 5.7%, respectively, tourism was down 15% in the U.S. and Europe but only 7% in Asia-Pacific.

By 2010, Asia-Pacific was the fastest-growing travel market in the world.

The PhoCusWright report asserted: “Several underlying dynamics — rising disposable income, infrastructure development (airports, hotels), growing demand for travel services and access to the Internet — have helped fuel travel’s growth across the region.”

In 2010, Asia-Pacific overtook the U.S. to become the world’s second-largest travel market after Europe, with gross bookings at $255.8 billion, surging by 17% over 2009 and just surpassing the U.S.’s $255.2 billion travel market bookings.

The value of the Asia-Pacific travel market is expected to reach $290.4 billion by 2012.

As strong as Asia-Pacific markets are, it is China that wields the vast majority of the region’s spending potential.

Jim O’Neill, the chairman of Goldman Sachs Asset Management, perhaps best stated the global thinking on China during the World Travel & Tourism Council (WTTC) Summit in Tokyo last month.

“If you don’t have some involvement in China, you are missing out on the main driver of the world,” he told the audience in a video message.

China not only has great potential but is already enjoying burgeoning commerce in inbound and outbound travelers.

According to PhoCusWright, China’s total travel market in 2012 is likely to reach $74 billion. And the authors of the Essential China Travel Trends Guide 2012 quote UNWTO Secretary General Taleb Rifai saying China is expected to become the leading international tourism destination and the fourth largest outbound market in the next decade.

The same publication cited Tony Tyler, CEO of IATA, predicting that by 2015, one of every seven journeys by air would be related to China. The GBTA study found that over the past 10 years, China’s four largest airports have doubled in size, and there plans are in place for approximately 100 new airports in the next 10 years.

AsiaPacific-HongKongMartin Craigs, CEO of the Pacific Asia Travel Association (PATA), said during the WTTC conference that in 1980 there were 3 million air travelers a year in China. By 2011, there were nearly 300 million. By 2029, he estimates there will be 1 billion.

“To meet that growth in China, Boeing and Airbus will have to deliver one 150-seat aircraft every two days,” he said.

Craigs added that the Chinese are predicted to spend $1.3 trillion over next 20 years on travel.

“Think of how many workers that will demand,” Craigs said. “Think of the hardware you will need ... the humans to operate hotels, the infrastructure that the airlines are feeding. That’s the massive challenge we should all enjoy and deal with in responsive ways.”

Frits van Paasschen, CEO of Starwood Hotels, said that within next three years, the company would have 16 hotels in China.

“That’s more than we have in Hawaii after 50 years,” he said.

Some travel agents in the U.S. are already finding ways to tap into the Asian market potential.

Craig Hsu, vice president of Travel Design USA, sells travel to Asian clients, a sales strategy that piggybacked onto the outbound travel his family has long sold to Chinese-Americans.

The Asian source market has been growing about 10% over the last two to three years, he said, and is continuing to grow.

He said mainland China is definitely his fastest-growing market, followed by Hong Kong and Taiwan.

Hsu has had to hire more translators for cruise ships brochures and menus and is arranging more cruise groups that include a Chinese-speaking guide to meet the demand.

Hsu said he expects the market to continue to increase “exponentially within the next five years.”

“It’s a snowball effect,” he said. “The momentum is going, and it grows and grows.”

Follow Johanna Jainchill on Twitter @jjainchilltw. 

This page is protected by Copyright laws. Do Not Copy. Purchase Reprint
blog comments powered by Disqus

View Comment Guidelines

Please upgrade your Flash Player.
Please upgrade your Flash Player.

Travel Weekly Poll

Voices

  • Consumer media discover that travel agents do exist

    "Contrary to some thoughts, travel agents do exist ... We are usually able to get clients better prices, and we know we can see that clients have better experiences. And as our personal motto is: Our Service Travels With You."

    More»

TW Index: Most Active Stocks

Latest Top News:
Caribbean
Europe
Travel Weekly is on Facebook
Viewpoints For Travel Agents
Travel Weekly Topics