The US and China strengthen tourism ties – what’s the industry impact?

TravelMole guest comment by Michelle Grant, travel & tourism manager, Euromonitor International

The US Department of Commerce signed a Memorandum of Understanding (MOU) with China last month which permits group leisure travel from China to the US. 

The Chinese government restricts leisure travel to groups and only to destinations with Approved Destination Status (ADS). 

The MOU serves as a proxy for ADS and under the MOU, effective in the spring of 2008, US companies will be allowed to work with Chinese travel agencies to organise and promote organised, leisure tour groups to the US. 

Additionally, the MOU gives US destinations and private companies freedom to market themselves to Chinese consumers. One caveat is that if too many Chinese visitors overstay their visas, the US will withdraw from the understanding.

The market potential is great

In 2006, over 320,000 Chinese visited the US. However, about 70% came for business, meaning there is great potential to increase the number of leisure travellers. 

By 2011, Euromonitor International forecasts that 80 million Chinese travellers will go abroad and spend $52 billion—making it the largest source of departures.

Steps to a liberalised air policy

In the spring of 2007, the US and China amended their 2004 agreement that limited US carriers to only 10 daily flights from the US to three cities:  Shanghai, Beijing, and Guangzhou.

The new agreement adds 13 daily flights over the next five years and allows three additional US airlines to fly to China over the same time period. As a result, Delta, United Airlines, American Airlines, Continental Airlines, Northwest Airlines and US Airways were awarded direct routes to China.

The MOU will likely boost demand for seats on those routes and these airlines will benefit from restrictions that limit the amount of capacity that can be added to the routes.

However, in 2010, China and US will reconvene to develop a timetable for completely liberalising the skies.

US destinations ready to pounce

Despite marketing restrictions, US cities and states – San Francisco, Los Angeles, New York City, Nevada and Hawaii – opened tourism offices in China ahead of the MOU. They are now free to promote their destinations.

All are likely to benefit due to their strong marketing initiatives, but San Francisco, Los Angeles, and New York City are likely to benefit more since they are connected by direct flights.

However, Las Vegas is within direct flying range of China and could profit from tour operators using charter flights from Beijing or Shanghai, putting it in direct competition with Macau.

The Summer Olympics in August provides an ideal time for these destinations (and US companies in general) to promote themselves to the Chinese public.

Challenges lie ahead

With the ability to work with Chinese travel agencies to sell leisure packages, US tour operators must take care to understand Chinese travellers.

Many Chinese travellers prefer to spend more on shopping than accommodation and most travel during the three Golden Weeks. 

Additionally, all travel and tourism players must ensure that the proper infrastructure is in place, such as tourist guides who speak Mandarin.

Most importantly, though, the US needs to ensure that all visitors feel welcome to the country from the visa application to the departure.