On trade wars, tough talk, and travel. Why America needs Chinese travelers to visit more than ever.

A six percent decline in Chinese visitors to the U.S. in 2018 has government agencies and destination marketers scrambling to find a solution

International inbound tourism numbers for the first quarter of 2019 are out, and a continuing trend is only accelerating: visits to the United States by well-heeled Chinese travelers are plummeting. And while travel is a central talking point in current trade negotiations, this decline has huge implications on the roughly $33 billion spent annually in the United States by Chinese visitors—based on consensus estimates from U.S. Customs & Border Protection of 3.2 million Chinese visitors entering in 2017 and 2.9 million visitors entering in 2018.

The U.S. has maintained trade and policy disputes with Beijing for decades, namely over free trade and intellectual property, both valid points of contention. However, in the past few years we have seen a dramatic increase in policy that is anti-Chinese, and in some ways, un-American. Reducing the opportunities for Chinese students to study in the U.S. and for entrepreneurs to invest and grow companies here is counterproductive. Denying work and travel visas as a State Department tactic without proposing a sustainable solution is shortsighted as well. Detaining and scrutinizing Chinese-American citizens at our points of entry further overwhelms an already strained TSA, Customs & Border Protection, and State Department system.

Plus, educational opportunities often work in tandem with tourism. Countries including the U.S., the U.K., Switzerland, and France play host to hundreds of thousands of Chinese students at elite prep schools and top public research universities. Foreign students in the U.S.—many of whom are Chinese—accounted for an overall spend of approximately $39 billion in the 2017-2018 academic year according to one estimate. Many of these students travel to-and-from their home nation several times per year.

And it should also be worth noting that the average Chinese leisure visitor to the United States spends approximately $6,700 during their stay, roughly double that of visitors from other points of origination according to the U.S. Travel Association. These visitors are not typically looking for travel bargains, but rather once-in-a-lifetime experiences to see America.

With the rhetoric over the Sino-American trade war only continuing to heat up, it's anticipated that 2019 will see an even steeper decline in tourism numbers as relations continue to fray. This is after 15+ years of double-digit growth. The ratcheting up of "America first" trade policies has no doubt sent a chill across the overall Chinese economy and has left newly-minted middle-class consumers with less in their pockets. 

We know too that history has a way of repeating itself: after the great U.S. recession in 2009, visits by Chinese nationals surged. The U.S. dollar was a relative bargain and restrictions on travel visas were minimal at the time. Now just ten years later, the cross-cultural relationship has devolved into politicization and diplomatic restrictions from both sides.

Moreover, as trade policies are addressed and tweaked by leadership in Beijing to match the tit-for-tat actions in Washington, Chinese lawmakers have begun to examine more harmful tariffs imposed on outbound travelers. The implications could be significant.

A recent Bank of America Merrill Lynch research report looked deeper at the worst-case scenario: a 50 percent decline in overall Chinese travel would amount to an $18 billion dollar hit across the board. So, this should be especially concerning for U.S.-based travel and tour operators, hotels and casinos, airlines, and even attractions and popular U.S. destination cities such as New York, Los Angeles, and Orlando. Local economies, with broad exposure to travel and tourism dollars through mom-and-pop businesses such as transportation and restaurants and retail, could feel the impact directly.

Even more impactful to this discussion is the total number of Chinese tourists that have taken to traveling abroad since their country joined the World Trade Organization in 2001. Just 12 million Chinese residents had been overseas at that time and now that number is estimated at 140 million people—a more than 10x increase. So if America is not a friendly place to visit, Chinese travelers will simply go elsewhere.

On June 4th, an official statement from China’s Ministry of Culture and Tourism warned Chinese tourists that they would be subject to increased scrutiny, harassment, and even interrogation upon entering the U.S. And this comes just one day after the Chinese Ministry of Education notified students studying abroad at U.S. universities that visas could be delayed and their social media activity could be reviewed and monitored.

What we know with certainty is that the future of China is in their youth. Young people comprise a huge number of their traveling population and increasingly they are socially aware, open-minded, and tapped into world affairs despite restrictions to the internet and censorship back home. These are young people that want to see the world, visit popular destination cities, and experience American culture firsthand. This is the WeChat generation, who seek to broaden their horizons. How the United States reacts moving forward is anyone's guess.

Roger Dow, the President and CEO of the U.S. Travel Association released the following statement in the hours after the June 4th Chinese warning:

“As we have before, we continue to urge both governments not to politicize travel for the reasons I have stated often: travel is incredibly valuable for both countries in terms of direct commercial activity and business relationships that have a broad downstream economic impact.”

From an actionable standpoint, several major U.S. destinations are doubling down on their efforts to roll out the welcome mat to Chinese travelers including significant marketing and social media efforts.

California, which sees more visitors and economic impact from Chinese travelers, is aggressively investing in their tourism efforts through both their Visit California/ Brand USA campaign and individual efforts from Los Angeles Tourism and other municipalities. California played host to 1.6 million Chinese visitors and continues to recognize the importance that these consumers play in their state’s economy.

So is the Sino-U.S. travel slide subject to a wait-and-see scenario, or can the ship be righted?

Plenty of tourism officials including those from California, New York City, and Las Vegas, Nevada do remain bullish on the long-term prospects for tourism growth, with or without a trade war.

Solutions include seeking a long-term Congressional funding solution for Brand USA, our public-private tourism partnership—a key step in continuing to promote the U.S. as a place to visit. Currently, $10 out of $14 spent on every U.S. visa waiver by international travelers (known as ESTA, or the Electronic System for Travel Authorization) helps to fund Brand USA.

Brand USA also has a strong track record of success in China and recently wrapped up its 2019 China Sales Mission for the 4th year in a row. Officials have focused on meeting with and furthering B2B relationships with representatives from leading tour companies, airlines, and destination managers from Beijing, Guangzhou, and Shanghai.

It’s imperative that a multitude of destination marketing efforts help get inbound travel to the U.S. growing again. In the case of Chinese travelers wishing to visit the U.S, there are about 4 million reasons why.

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