In the battle for corporate travel expense supremacy, the Chinese are the victors.
According to a report from the Global Business Travel Association, in 2015, business travel spending by the Chinese reached $291.2 billion, slightly more than the $290.2 billion spent by American business travelers.
What that means: Companies need to take notice and if they aren't already accommodating Chinese travelers, they need to get on it.
Travel spending by Chinese companies is likely to continue rising this year, increasing 10.1 percent to $320.7 billion versus the 1.9-percent uptick to $295.7 billion spent by U.S. companies.
“I think it’s game changing," Michael McCormick, the GBTA’s executive director and COO, told USA Today. “It’s a significant milestone and a change in the order that we’ve basically had since we've been tracking business travel."
How Companies Are Investing
One percentage is most noteable: 95 percent of that corporate travel spending occurs inside China. Whichis why U.S.-based hotel companies are so eager to invest and develop within China.
Take Hilton, which recently opened its flagship Hampton by Hilton in Guangzhou. Bruce Mckenzie, SVP, operations, greater China & Mongolia for Hilton Worldwide, described Guangzhou as one of China's four key cities, and a major development destination for Hilton in the coming years, driven primarily by growth in the midscale segment. "Guangzhou is a huge base for travel within China and internationally, and getting a Hampton in here, in this stage of the brand's life ,is a very strong position for us," Mckenzie said.
The Hampton brand's push into major Chinese travel arteries, such as Guangzhou, is meant to appeal to the country's emerging middle class. According to Lee Wee-Hau, SVP of development, greater China for Hilton Worldwide, up until 10 years ago the majority of hotels in the country were at the high end and luxury level, and were built to appeal to international travelers first; meanwhile, budget, hostel-like accommodations occupied cities as the primary lodging option for the local Chinese traveler. The hospitality landscape of the country has shifted since then, with more midscale travel taking place in excess of supply.
"As the economy has grown over the past 10 to 15 years, that middle class has also grown," said Phil Cordell, global head, focused service and Hampton brand management, Hilton Worldwide. "Just as you've seen Western retail and food-and-beverage brands come [to China] because they recognize there is disposable income that can be tapped into here, so has the hotel industry seen the opportunities here as well."
Jim Holthouser, EVP of global brands for Hilton Worldwide, said the middle class has grown so quickly in China that the potential growth for Hampton in the country is limitless, in excess of the 400 hotels are planned for the country but not yet under contract. "Guangzhou is a city of 23 million people. Large cities in the U.S., like Chicago, have 7 or 8 million people by comparison," Holthouser said. "When you count the number of cities in China with 5 million people or more, the lights start coming on and the investment to get into the market starts to make sense."
Stateside, Hilton established its "Huanying" program to cater to Chinese visitors at 100 hotels. The program ensures a Mandarin speaker at the front desk and other amenities and services, such as congee.
Meanwhile, IHG, whose brands include Holiday Inn and Crowne Plaza, opened 32 hotels in China last year, and as of December, had 265 properties there with more than 85,000 rooms. In 2012, it launched a China-based chain called HUALUXE, which it plans to expand to cities such as New York and London to cater to Chinese visitors.
And last month, Marriott International expanded its portfolio in mainland China with the launch of its first hotel in Taizhou, an industrial city in the Yangtze Delta region.
“Local demand for Marriott Hotel’s brand is surging, driven by the region’s robust economic growth and rapid infrastructure development, and our hotel is well poised to serve increasingly refined hospitality needs in Taizhou,” said Mark Chan, GM of the Zhejiang Taizhou Marriott Hotel.
The Taizhou property becomes Marriott International’s 91st hotel in China, and its 26th under the Marriott Hotels & Resorts brand.