The travel management companies sector in China is set for explosive growth if the industry can overcome challenges in China's regulatory environment and in technology infrastructure.

This is according to a report commissioned by Amadeus and PhoCusWright.

Entitled Corporate Travel Management and Practices in China, the report found that less than 20% of 112 corporate executives in China interviewed use TMCs to manage their corporate bookings. With the scale of the Chinese corporate travel market, this figure is considerably low compared to smaller markets in other parts of the world.

Mr Peter Smith (right), Vice President, Business Solutions Group, Amadeus Asia Pacific, said, "There are currently several MNCs in China with a US$100 million annual travel spend, but TMCs in China remain highly underutilised.

"It is obvious that there is still huge potential for TMCs in China to grow their business and for corporations to improve efficiency and cost savings with the use of TMCs. If TMCs want to fully maximise the vast opportunities in China, it is critical that they understand the complexity of the market and overcome the challenges that exist."

The report identified two major challenges for TMCs operating in China:

1. China's regulatory environment

Most industries in China operate under a strict regulatory environment and the airline and travel industry is no exception. To operate in China, TMCs must have a strong working relationship as well as the ability to interface with TravelSky, the sole government-approved computer reservation system (CRS) that plays a critical role in air ticket distribution.

As part of this relationship, TMCs have to build local technology systems that are compatible with TravelSky, but not with their global platforms, making it difficult for TMCs to integrate data worldwide for reporting and traveller tracking.

At the same time, this also means that multinational companies (MNCs) are unable to deploy their own self-booking tools. If MNCs work with TMCs in China, they have to wait for almost a month to integrate China data with the rest of their global travel management data. Finally, current Chinese regulations increase complexities for foreign companies that want to set up offices or branches in other cities in China other than Shanghai, Beijing, Guangzhou and Shenzhen. This is a huge setback for TMCs looking to expand their business nationwide.

2. Limited use of IT for travel management

Ram Badrinathan (right), General Manager of PhoCusWright Asia Pacific added, "There is a widespread perception in China that centralising travel management will not yield the lowest air or hotel rates for companies, and that having travellers comply with travel policies is helpful enough. However, corporations working with the right TMCs that deploy cutting-edge technologies will in fact be able to better automate travel processes, administer travel policies as well as cut costs."

The need to raise awareness of the benefits of using centralised IT travel management systems is most pressing for private domestic companies (PDC) and state-owned enterprises (SOEs). This is because MNCs accounted for the lion's share of corporations that use TMCs – about half of the MNCs interviewed used a TMC compared with only 5% of the PDCs, and fewer than 5% of the SOEs.

The report suggests that change is forthcoming. China's commitment to the World Trade Organisation presents huge incentives for the market to relax its regulations. Deregulation of airline commission payments by China Aviation Administration of China (CAAC) earlier this year could also move the industry toward a zero-commission environment, forcing significant change in the market.

Furthermore, IT penetration will proliferate, further driving corporations in China to consider centralised IT travel management. This will be driven by the growth of corporate credit card adoption, the spread of broadband infrastructure into the regions, as well as the rapid enlargement of the technologically savvy under-35 generation.

4Hoteliers is the "Official Daily News" of WIT09

www.webintravel.com - October 20-23, 2009 Suntec Convention Centre, Singapore