JOIN USAsia, Middle East giving a big push to air travel, hotels
From Asia to Africa to the Middle East and the Americas, the business of business travel is booming in emerging countries. And it shows. Dubai, an emirate with global ambitions to diversify, expanded its airport recently with a new terminal paved with white marble, devoted to its growing fleet of Airbus A380s double-deckers. Similarly, Beijing and Shanghai both greet foreign travellers with gleaming and spacious new international terminals.
Istanbul, ancient capital of empires, is successfully refashioning itself as a modern transportation hub with better connections to Asia than rivals in the United States or Europe. And Brazil, a rising oil power, is pouring billions into infrastructure as it prepares to host the soccer World Cup next year and the Olympic Games in 2016. Business travellers are expected to spend about $1.16 trillion on airfare, accommodations and other travel this year, according to the Global Business Travel Association, up from $1.07 trillion last year. Much of that growth is coming from developing nations, prompting a boom in new construction in emerging markets while business travel in the US recovers at a slow pace and Europe, mired in the euro crisis, remains stagnant.
“What we’ve seen in terms of infrastructure in recent years recalls the old baseball adage – if you build it, they will come,” said Tony Davis, a partner at Irelandia Aviation, an investor in low-cost airlines like VivaAerobus in Mexico and Tiger Airways in Singapore.
The growth in passenger travel tells the story. Global traffic rose 4 per cent last year, according to the Airports Council International, a trade group that represents more than 1,700 airports in 170 countries. In North America and Europe, airports had only modest gains. But air transportation in emerging economies has been buoyant – a testament to their dynamism and growth prospects in time of low interest rates, and their opportunities in raw materials, commodities and trade.
Traffic last year grew by 7.5 per cent in Asia, 7.3 per cent in Latin America, 6.4 per cent in Africa and 13 per cent in the Middle East, according to the airport trade group, outpacing western airports by a wide margin. Five airports in emerging markets, each with more than 40 million annual passengers, reported double-digit growth – Istanbul, Dubai, Jakarta, Bangkok and Singapore – according to a report released last month by the airport group.
Atlanta, currently home to the world’s busiest airport, grew 3.3 per cent. Chicago O’Hare International Airport, the second-busiest in the US, actually shrank slightly, according to the report. Nowhere has the growth in business travel been more robust and prolonged than in China. Passengers at Beijing Capital International Airport tripled in the last decade and most travel experts expect that it will jump ahead of Atlanta’s Hartsfield-Jackson International Airport as the world’s top airport by passenger traffic next year.
China’s business travel spending has grown an average of 15.5 per cent each year from 2000 to 2013 and is set to reach $226 billion this year, according to the Global Business Travel Association. Remarkably, that figure is growing even as China’s export-led economy begins to slow down and make the transition to a consumer-oriented one. Chinese business travel is forecast to increase nearly 17 per cent next year and China is set to overtake the US as the world’s top business travel market by then.
Shanghai built a new terminal at the Hongqiao International Airport as part of a $9 billion investment programme that also included a transportation hub linking the airport to city buses, subways and a new high-speed rail network. The airport, which opened three years ago and can handle 3,00,000 flights a year, has high-end shops like Armani and chains like Starbucks. To cater to China’s rising middle class and fulfill the leadership’s desire to reduce the economy’s reliance on exports, businesses will need a better travel infrastructure across the vast Chinese interior. To that end, the Chinese government has outlined plans to build another 100 airports throughout the country over the next couple of years.
“You really have a changing landscape throughout the developing economies,” said Michael W McCormick, the executive director of the Global Business Traveller Association, a group whose members include corporate travel managers. “The infrastructure is clearly racing to catch up with demand.”
Perils and inconveniences
Of course, travel off the beaten path holds its share of perils and inconveniences. Hotel infrastructure is often inadequate. Roads can be hazardous. Sometimes vaccines and antimalarial medication may be necessary. Climate is another challenge. Summer temperatures in Qatar, which won its bid to host the 2022 soccer World Cup, exceed 100 degrees Fahrenheit on average from May through September and can reach highs of 120 degrees.
There are other hazards presented by a rise in global travel, notably a greater risk of rapid disease transmission and pandemics. The latest threat emerged in China, where a previously unknown influenza virus infected dozens and killed at least 17 people recently. Another virus, similar to the one that caused severe acute respiratory syndrome, or SARS, was also recently identified in the Middle East.
Security issues are another consideration. In some places, the risk of kidnapping cannot be ruled out. Business travel suffered throughout the Middle East in recent years during the Arab uprisings, though they have also created new opportunities in the region. The Libyan economy had one of the world’s fastest growth rates last year, according to the International Monetary Fund, reflecting a strong recovery after its collapse during the uprising that toppled Moammar Gadhafi.
While air travel is going through its safest period in its history – the US recently had an exceptional four-year stretch without a fatal crash – flying in some parts of the world remains perilous. The growth in emerging-market passenger demand has attracted the attention of big hotel chains, who are now making large strategic bets throughout Asia, Latin America and the Middle East to cater both to foreign business travelers as well as a growing number of domestic travellers. Starwood Hotels, which owns the Sheraton and W Hotels chains, plans 100 new hotels in China over the next few years, many designed for the Chinese domestic audience and local tastes.
Emerging nations
Last year, Marriott outlined a $2 billion, three-year plan to open new hotels around the world with an emphasis on emerging nations. A third of those will be in Asia. It plans to more than double its 54 hotels in China, with midprice hotels aimed at China’s middle class along with luxury five-star hotels.
As they cope with all this growth, global hotel chains are also bringing more consistent travel standards to emerging markets, said Christie Hicks, who runs Starwood’s sales operations and its business-to-business relations. Business travelers increasingly expect to find the same sort of amenities anywhere they travel, including high-speed Internet connections and Wi-Fi, fitness centers and healthy food options.
Airlines are also expanding their international alliances to offer travelers seamless connections and more destinations than they could on their own. Star Alliance, the largest of the three major global alliances, added Shenzhen Airlines, Avianca of Columbia and Eva Air of Taiwan. Separately, China’s Xiamen Airlines, Aerolinas Argentinas, Saudi Airlines and Lebanon’s Middle East Airlines all joined SkyTeam last year. After months of speculation, Latam Airlines, which is the result of the merger between Lan Airlines of Chile and Tam Airlines of Brazil, said it would join the Oneworld alliance. The decision means that Tam will withdraw from the Star Alliance next year.
The megacarriers from the Persian Gulf, long reluctant to join in the alliance game, have also entered the fray lately. Qatar Airlines joined Oneworld last year. Etihad Airways has taken equity stakes in several airlines, including Air Berlin, Air Seychelles and Virgin Australia.
Even Emirates, which is based in Dubai and is the largest and most successful of the three gulf carriers, has entered into a partnership with Qantas Airlines, the Australian carrier.
The airports of Doha, Abu Dhabi, and Dubai, where the three carriers are based, now serve about 15 per cent of all passenger traffic going from Asia to Europe, and from Europe to the South West Pacific region, including Australia, according to Amadeus, an air travel technology developer. And while Paris, Frankfurt or London find it difficult to expand their airports to accommodate higher traffic, and often run at full capacity, Dubai has outlined plans for an entirely new airport to eventually replace the current one.
All this activity augurs well for business travellers. A recent survey of global routes by Amadeus found that the global industry had become more competitive over the last three years, with a higher percentage of air routes served by three or more airlines. The survey said the Asian market had the most competition among airlines, with 75 per cent of air passenger volume served by three or more airlines.
“I am absolutely sure the future growth of our business is in Asia,” said Dr. Jurgen Weber, the chairman of Lufthansa. “Living standards are going up and it turns out that the Chinese like to travel even more than the Japanese do.” And finally there is India, one of the world’s most populous nations with a vibrant economy, but a country that is still hobbled by poor investments and a cumbersome bureaucracy.
Ian Carter, the president for international development at Hilton, said that in most regions of the world, good infrastructure – airports, roads and highways – generally comes before the hotels. “It is rarely the other way round, the exception being India,” he said. “Generally speaking there are beautiful hotels there but getting there is like navigating an obstacle course.”