Today we released our latest forecast for the Chinese business travel market – and it continues to grow at a double digit pace. In fact, GBTA forecasts China’s total business travel spend to grow 15.9 percent in 2014 to $262 billion USD and another 18 percent in 2015. The unprecedented growth in China’s economy has propelled the country’s business travel market to represent roughly 20 percent of global business travel spending. As previously forecasted, we expect China to surpass the United States at the world’s largest business travel market by 2016.
Much like the rest of the world, China’s economy experienced a sluggish first quarter of 2014, but economic activity rebounded in Q2 largely thanks to improving exports, stronger household consumption and stimulus-driven local government infrastructure spending.
The improving exports are significant. Many media discussions call the housing sector China’s economic Achilles’ heel believing that China’s rapidly rising debt-to-GDP ratio and falling housing prices will lead to a debt-inspired collapse of the Chinese economy forcing a recession among its key trading partners. Unlike the U.S. housing collapse in 2006, however, China’s situation is dramatically different as there is less leverage, more equity and more policy weapons to soften the blow of falling asset prices. The real estate market bears watching, but its imminent collapse is unlikely. Given that as much as 40 percent of the economy is dependent upon exports, strengthening exports is welcome news, as GBTA believes its importance is underestimated and overshadowed by the current media focus on real estate risk.
In spite of these ongoing challenges, the economy will continue to advance at rates above 7 percent through 2015. GBTA expects China will see a continuation of robust domestic business travel spend growth in 2014 and 2015, growing 16 and 18 percent respectively. The continuation of this robust growth is unsustainable in the long run though unless levels of domestic consumption are boosted. Chinese authorities are focused on maintaining these current levels of economic growth while continuing to execute a long-term strategy to rebalance the economy to be less dependent on exports and investments and more focused on consumption.
After a few years of tepid growth, China’s international outbound (IOB) travel is also beginning to improve. GBTA expects IOB spending in China to grow 16 percent in 2014 and an additional 19 percent in 2015 to $13.4 billion USD.
To support the enormous growth of travel – both business and leisure – in China, infrastructure growth is necessary and China is answering the call. Over the last decade China’s largest airports have doubled in size and the construction of additional airports continues including Beijing’s second international airport, slated to begin this year and open in 2018.
In addition to airports, data from Lodging Econometrics shows 70 percent of the total room pipeline in Asia Pacific can be attributed to China as Beijing alone currently has 95 projects totaling 13,574 rooms. There is evidence, however, that the balance in the supply and demand for hotel rooms in China may be shifting as supply start to catch up with demand.
GBTA is a strong proponent of further developing the travel management profession in China and the entire Asia-Pacific region given this dramatic growth in business travel. Today, we are partnering with ITB Asia to host the GBTA Business Travel Forum in Singapore. It will be a full day of educational sessions, keynote presentations and panel discussions primarily for corporate travel buyers focused on expense management, best practice solutions, adoption of new technology such as self-booking tools, payment solutions, travel policy compliance, travel risk management and more.