Travel and Tourism- China Travel and Tourism Market

China
Overview

China is quickly becoming one of the hottest outbound tourism markets in the world. Although still in its infancy, the China market is being actively courted by tourism destinations across the world that seek to attract China’s projected 100 million international travelers by 2020.

The United States is increasingly becoming an attractive and feasible destination for Chinese travelers, standing as the 8th most popular destination for Chinese travelers and the top destination for Chinese travelers outside of Asia. Although Chinese outbound tourism to the United States has been traditionally thought to be hindered by insurmountable policy and security obstacles, a great deal of progress has been made in visa and tourism policy over the past few years. This, in addition to increased promotion and interest in the United States has led to increased opportunities and potential for U.S. companies in this dynamic, developing tourism market.

Best Prospects/Services

Due to the overall vibrancy of the U.S.-China trade relationship and the nature of Approved Destination Status (ADS), which officially regulates group tours overseas, most Chinese groups travel on mixed business and tourist itineraries. This has led to significant growth opportunities in business travel and the Meetings, Incentives, Conventions, and Exhibition (MICE) segment as many tour groups anchor their (tourism) travel itineraries with visits to U.S. exhibitions, conferences, and companies.

Travel agencies have expressed their intentions to double or triple tour group numbers in the next two years, particularly in the MICE segment. In recent years, large-scale incentive travel has become a common tool for rewarding Chinese employees. Such trips have included trips for up to 7,000 employees to Thailand on package tours. A cruise operator stated that a direct-marketing company is considering rewarding its China salespeople with incentive cruises that will include between 16,000 and 18,000 people.

Opportunities

According to estimates by the World Travel Organization (WTO) and China’s National Tourism Administration (CNTA), China is expected to contribute a projected 100 million international travelers to the international tourism market by 2020. Global outbound tourism saw an increase of 43% in the number of Chinese outbound tourists to 31 million in 2005. (Figure 1) This number is expected to rise quickly as the Chinese government continues to ease government regulations, disposable incomes of China’s class continue to rise in major cities, and Chinese travelers seek to travel outside Asia to United States and other long-haul destinations.





According to the World Travel and Tourism Council, which aggregates all tourism spending for each country including a huge array of tourism-related activity, in the next decade, Chinese travel expenditure is expected to be the second-fastest growing in the world at close to twice the global average. (Figure 2)




Government Regulation: Approved Destination Status (ADS)

Approved destination status (ADS) refers to countries, which have been approved by the PRC government for designated PRC travel companies to organize group tours to. As of April 1, 2006, China granted ADS status to 124 countries and regions and implemented the program in 81 countries.

Contrary to popular misconceptions, although the United States and China currently have no formal ADS agreement, the U.S. has long welcomed Chinese tourists to the United States. Traditionally, ADS has been considered a significant barrier to entry for the U.S. tourism industry because officially, according to Chinese law, Chinese tour operators are not authorized to advertise or organize tour groups to countries without ADS status. However, since there are no restrictions on travel not classified as “group travel” or group travel not officially categorized as “tourism,” Chinese tour agents have been able to find a wide variety of alternatives to ADS restrictions in the interim. In addition, there have been significant improvements in visa processing and bilateral tourism cooperation that will continue to promote and facilitate more Chinese travelers to the United States.

In terms of visas, the U.S. Embassy and consulates and China have been issuing an increasing number of B1/B2 (business or tourism) visas to Chinese travelers in the past few years. In the fiscal year ending Sept. 30, 2005, the U.S. issued 292,248 non-immigrant visas in the People’s Republic of China. 77% of those visas were B1, B2, or B1/B2 visas (business or tourism). The U.S. Department of State also extended the standard B1/B2 visa validity for PRC citizens to a multiple-entry, 12-month visa in January 2005.

In December 2004, the United States Department of Commerce and China National Tourism Administration established a Travel and Tourism Subgroup under the Joint Commission on Commerce and Trade (JCCT) to promote cooperation on travel and tourism. The Subgroup met in April 2006 to develop bilateral tourism polices and a work plans for 2006-2007. For the first time, the subject of ADS and policies to facilitate the travel Chinese travelers to the United States was discussed in the meeting. In the upcoming months, the U.S. Department of Commerce, the Chinese National Tourism Administration, and appropriate agencies from both countries will continue discussions and negotiations on these matters.
Opportunities for U.S. Companies
Despite the United States’ lack of an ADS agreement with China, it in fact continues to be one of the top outbound markets from China in terms of total arrivals. In 2005, according to the China National Tourism Administration, the United States was the eighth outbound market in China with 532,000 Chinese traveling to the United States as a first stop. The United States was the only long haul market in the top ten Chinese travel destinations. It is interesting to note that despite the lack of an ADS agreement, the United States still receives significantly more travelers than other long-haul destinations like Australia, the European Union, and other ADS countries.

According to the U.S. Office of Travel and Tourism Industries, China was the United States’ 12th largest and fastest growing market in 2005 with a 33% growth in arrivals since 2004.