Trade war with China projected to cost U.S. billions in lost tourism dollars

Trade war with China projected to cost U.S. billions in lost tourism dollars

Re: Trade war with China projected to cost U.S. billions in lost tourism dollars.

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First published on August 22, 2019 / 8:58 AM/ MONEYWATCH

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  • The trade war with China is having a dampening effect on Chinese tourism in the U.S.
  • The U.S. could see nearly 2 million fewer Chinese visitors because of hostile trade relations, travel advisories and rising currency exchange rates, one analysis found.
  • In all, that’s projected to cost the U.S. $11 billion in foregone tourist spending.

The Trump administration’s bitter trade feud with China could deliver another economic blow by quashing Chinese tourism in the U.S.

The flow of visitors from the People’s Republic coming to the U.S. has already diminished since the conflict erupted in early 2018, and continuing tensions are projected to result in 2 million fewer Chinese tourists through next year, according to a new estimate from Tourism Economics, an Oxford Economics company. Over two years, that adds up to $11 billion in lost spending. 

The research firm estimates that a significant decrease in Chinese tourists last year resulted in a loss of roughly $2 billion in spending in the U.S. In 2019, nearly 650,000 fewer visits are expected—another $3.8 billion in foregone spending. While such dollar figures are a fraction of the $20 trillion U.S. economy, they are meaningful to local economies, especially for smaller businesses that cater to tourism and at a time economic growth is slowing.

Chinese tourists are top spenders

Chinese tourists make up the third-largest market for travel to the U.S. and spend an average of $5,800 per visit—more than any other nationality. By comparison, visitors from the U.K. the largest market for arrivals to the U.S., spend roughly $2,500 per person. 

“The Chinese tourist is important to the U.S. because China ranks No. 1 in revenues generated from travel,” said Larry Yu, professor of hospitality management at George Washington University. “Here in D.C., China is the No. 1 overseas market. It’s quite significant for economic contributions to local destinations.”

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Hostile rhetoric between the two nations has deterred some travel from China to the U.S., including government-sponsored visits.

“The whole environment right now is affecting some individuals’ mindsets, who are putting off their travel to the U.S. for a later time when the situation improves,” Yu said. “Hopefully the market will rebound once the trade issues are resolved.” 

Inbound visits from China to the U.S. fell 5.7% in 2018 compared to the previous year—that was the first decrease in arrivals from China in 14 years, according to Tourism Economics. And inbound travel from China was down 2.2% for the first six months of 2019 compared to the year-ago period. 

Stoking fear of “shootings, robberies, and thefts”

Tourism experts agree the trade war is bad for business.

“The loss in visitors is real,” said Tori Barnes, executive vice president of Public Affairs and Policy at the U.S. Travel Association. “So we think that the sooner the governments can end the trade dispute, the better it will be from an economic standpoint.”

A stronger U.S. dollar and weaker yuan is also dampening Chinese visits to the U.S. 

“The impact is that it becomes more expensive for Chinese travelers to either purchase travel packages in advance, and it becomes more expensive on the ground because they have had to exchange currency at a weaker rate and we have continued to see the U.S. dollar strengthen,” said Jordan Rosenthal, an economist at Tourism Economics. 

Other factors discouraging Chinese tourism include travel advisories and restrictive visa policies. China has not yet officially restricted travel to the U.S., but in June issued warnings highlighting the potential for “harassment” by U.S. law enforcement agencies, and also stoked fear of “shootings, robberies, and thefts.”

“Consequently, there have been increasing reports of cancellations from student and broader tour groups,” Tourism Economics said in a report. 

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Though the risks to the economy are real, Elliott Ferguson, president and CEO of Destination DC and chair of the board of U.S. Travel Association, sees China as a longer-term play. “We are full throttle with our efforts because we know long-term interest and demand still remains, above and beyond politics.” 

Sage Brennan, co-founder of China Luxury Advisors, a company that helps brands engage Chinese consumers, expects Chinese spending in the U.S. to grow over the long term. 

“There is still such a huge deficit in terms of brand awareness and the opportunity for brands to attract Chinese customers and for Chinese consumers to come here and learn about things,” he said. “It’s still a huge opportunity for people.”

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