American Express Business Travel announced results from Annual China Barometer
American Express Business Travel announced the results of its
2008 China Business Travel Survey (The Barometer) at the fourth annual
American Express China Business Travel Forum (CBTF) last week in Shanghai. The Barometer has become an annual fixture at this forum, offering insight to attending companies into the business travel market in China. This year, attendance reached nearly 2,000 with a mix of multi-national and domestic companies represented.
"The American Express CBTF provides me an opportunity to meet face to face with suppliers and experts and gain knowledge to help guide how LVMH should move forward with its travel program," stated
Marieke Flament, Financial Analyst, LVMH.
"There are certain barriers in this market which make it challenging to influence employee travel behaviors and their compliance with policy. However, given the current financial crisis situation, we’ve been able to make much headway as the need to save, but keep employees traveling, is a top priority. China is a key growth market for us, and we need to continue to travel domestically in China to reach our growth objectives in this market.”
According to The Barometer, travel and entertainment (T&E) spending has consolidated its position as the second largest controllable cost for companies within China in 2008. The Chinese business travel market continues to be largely driven by demand for domestic travel and is becoming better managed with more controls and methods to monitor travel expenses. The survey also shows that travel policy compliance has improved and is reinforced with new concerns regarding environmental issues and employee safety and security.
Respondents to the survey also indicated that the use of the internet is not only becoming more common for business travel requirements but also has reached a level of maturity which shows that companies are in a need of tools capable of fulfilling their cost reduction targets.
“So far, the online reservation is an assistant tool, but an important one,” said
Huang Hongxing, Expense Management, Assistant Director,
Baoshan Iron & Steel Co., Ltd.
“It is very appreciated in the whole company. In fact, our employees enjoy using the internet to look for information they need. For the other online functions, it is still limited. The use of this tool should increase, not only because our travel policy develops, but also because a better knowledge of this tool will make it more attractive.”
More organizations are turning to travel agencies for their business travel requirements. There is strong interest in full travel management, which demonstrates that companies are firmly engaged in the management of total expenditure and implementing process and purchasing controls.
“To control our travel expenses, the most important action is to use a good TMC,” said
William Wang, Senior Strategic Buyer, Global Sourcing,
Sony Ericsson Mobile Communications,
China Co Ltd.
“Our TMC helps us to implement our policy, to make sure that our employees respect it and to get the best prices. That allows us to keep the development of our business and control our expenses.”
The Barometer shows continued growth in T&E expenses in China:
- The Chinese business travel market is very similar to the US market in that it is self sufficient and the majority of expenditure takes place domestically.
- Domestic travel still dominates the market, with an increase this year for foreign owned companies.
- T&E expenditure in Mainland China by foreign owned companies rose to 59% in 2008 from 56% in 2007, suggesting that these organizations are working to develop and increase market share within China.
- 42% of organizations surveyed report an increase of their T&E budget over the last 12 months.
- T&E is regarded as an investment instead of a cost center with the main purpose of business travel being to develop or maintain business in both existing and new markets.
- T&E has consolidated its position as the second largest controllable cost for companies within China in 2008, rising 7% to 31.5% of a company’s controllable expense base.
The Barometer reveals that companies in China have been giving a consistent focus to optimize and control T&E expenses. Over the last three surveys the focus on employee efficiency has been a growing concern while cost still remains important in devising T&E policy.
- 70% of the companies surveyed indicated that they have a formal T&E policy.
- This year, a major trend is emerging -- employee care is extending beyond efficiency. Staying in contact on a continuous basis with employees on business trips is now becoming a major asset for companies in the face of changes in business and world disruption. As a result 93% of companies declare they have put in place security rules.
- With environmental concerns increasing in importance, 44% integrate environmental issues into their travel policy and more companies are implementing measures to protect the environment.
- The survey also shows that the overall compliance rates remain stable. This year, 51% of surveyed companies achieved compliance rates above 50%, which has increased by 4% compared to last year.
“It is pleasing to see more structure being applied to business travel management in China,” said
Charles Petruccelli, President, Global Travel Services, American Express.
“The Barometer has indicated that companies operating in China are constantly looking for opportunities to optimize and control their T&E expenses, and recognize it as an investment that can add to their bottom line. As a world leader in business travel management, American Express is proud to be working with our growing customer base in China to help them capitalize on these opportunities.”
Further findings of the Barometer include:
- The number of companies which have procedures in place to control T&E expenditure has increased for the third consecutive year to 76%. Although to a lesser degree, companies continue to use a mix of methods and tools to control their T&E expenditure.
- 64% of organizations are using negotiated fares. There has been a reduction in the use of economy and an increase in business and first class fares which is probably due to the slight increase in budget spent on overseas and Hong Kong destinations.
- Going on-line is more common – 80% of companies consider online booking a common practice. The internet is becoming a much more important means of booking business travel because it is convenient, easy to use and fast (63% said they use online tools, up from 61% last year). While usage is slightly on the increase, showing that companies are still in need of tools capable of fulfilling their cost reduction target, compliance rate objectives and data consolidation of fragmented sources.
- Almost half of the companies surveyed are using a travel agency for business travel, 6% higher than last year. Another sign of evolution is that 22% of companies have consolidated their travel requirements with one agency compared to 15% last year. This is a sign that companies are seeking opportunities to optimise and manage T&E expenditure by consolidating their spend and increasing their negotiating power.
- For those companies that don’t use a TMC the main barrier remains for 47% of companies a lack of knowledge of the services provided.
- Chinese companies continue to use different methods of payment. Non cash methods still have difficulty in emerging as alternative methods of payment. Payment methods remain cash orientated, but it is indicated that the use of Corporate card programs has slightly increased this year.
“Looking forward to next year, 42% of organizations expect their T&E expenditure to increase over the coming twelve months as they increasingly recognize the vital role it plays in conducting business. Therefore it is critical for companies to maximize control and identify cost saving opportunities. American Express will use the findings of the Barometer to work with our customers and build on our success in the market to help companies improve their T&E practices and achieve their business goals,” said Mr. Petruccelli.
Theodore Koumelis
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Thursday, November 06, 2008