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Publish Date: 
Wednesday, August 20, 2014
China Investment

As the number of Chinese business and leisure tourists visiting the United States continues to grow at a rapid pace, opportunities for mutually beneficial partnerships between Chinese and US companies are also on the rise, writes Emily Eastman

The United States leads the world in terms of revenues from international tourism, and is the second-most-visited country in the world after France, attracting a total of 69.8 million visitors in 2013.

“Travel and tourism to the United States continues to break new records, boosting our exports and helping strengthen our economy,” US Secretary of Commerce, Penny Pritzker said in a statement last year.

The travel and tourism industry drives a plethora of business activities, including transportation, food, entertainment, retail and lodging. Data released earlier this year by the US Department of Commerce’s Bureau of Economic Analysis (BEA) demonstrates that the travel and tourism industry is playing a pivotal role in supporting the US economic recovery. In 2013, travel and tourism accounted for 27% of all services exports, and generated a net trade surplus of $57 billion. As of 2013, the industry also employs eight million people in the country.

Based on the National Travel and Tourism Office’s (NTTO) 2014 Spring Travel Forecast, the US Department of Commerce predicts that international travel to the US will continue to experience strong growth over the next few years. Visitor volume is expected to increase by 3.5% this year, and it is predicted that by 2018, inbound tourism will have expanded by some 20%.

Four countries have been identified as the biggest contributors to projected tourism growth in the US between 2013 and 2018: Canada (23% of expected total growth), China (18%), Mexico (11%), and Brazil (7%).

The Travel Promotion Act
In 2010, President Barack Obama signed the Travel Promotion Act into law, putting in place a new partnership between the US Government and the nation’s travel and tourism industry. The Act identified enhanced visa issuance and travel facilitation as key to making the US a more attractive and accessible destination.

Brand USA – a non-profit organisation set up under the Travel Promotion Act – seeks to promote the US as a compelling destination for international travellers through consumer and travel trade marketing, advertising, events and promotions. A number of private companies have entered into partnership with Brand USA, including British Airways, Hilton Worldwide, Virgin Holidays, Air Berlin and Expedia. The organisation has built an expansive international representation network, spanning across almost 20 countries, and offers a variety of programmes designed to promote tourism goods, services and packages to potential traveller markets. Brand USA is set to launch campaigns in a further 10 international markets.

A report issued by analysts Oxford Economics found that in the fiscal year 2013, Brand USA marketing generated 1.1 million incremental trips and $3.4 billion in additional visitor spending. The report also found that, based on its marketing expenses of $72 million and visitor spending, Brand USA got a return on investment of 47 to one.

“In a global tourism market that is hyper-competitive, Brand USA has already gone a long way toward levelling that playing field, bringing billions of dollars in new overseas spending to our economy,” said Roger Dow, CEO of the US Travel Association.

In 2012, President Obama launched the National Travel and Tourism Strategy, which set a goal of drawing 100 million international visitors by 2021. This is expected to generate $250 billion annually. To achieve this goal, the Travel and Tourism Advisory Board has identified four priorities to fuel growth in the industry over the next few years: improving the visa and entry process; increasing infrastructure investment; looking more closely at Brand USA; and encouraging public-private partnerships.

The US has recently expanded the Trusted Traveller Programme, designed to facilitate entry into the country for pre-approved frequent low-risk travellers. Under the programme, participants may enter the US using automated kiosks located in selected airports. The Visa Waiver Programme, which provides visa-free entry, has equally expanded to cover 38 countries.

In the fiscal year 2013, consular offices overseas issued almost 9.2 million non-immigrant visas to the US, up from some 6.5 million in 2010. Furthermore, President Obama is set to direct Commerce Secretary Penny Pritzker and Department of Homeland Security Secretary, Jeh Johnson to develop plans to improve entry process to the country’s 15 largest airports.

The President also wishes to enhance airport technology. According to a White House report issued in May 2014, Dallas/Fort Worth and Chicago O’Hare airports have used technology to cut average waiting times to 15 minutes, representing a reduction of almost 40%.


Emerging source markets
The US is particularly looking to attract visitors from Brazil and China, whose citizens are expected to drive global tourism growth over the next few years. In the fiscal year 2012, the Department of State created over 50 new officer positions in China and more than doubled Mission Brazil’s consular staff. Visa-waiting periods in Brazil and China have dropped from as high as 100 days, to an average of less than five days. In 2013, total spending by travellers from these two countries exceeded $20 billion, compared with $8 billion in 2009.

An estimated 1.8 million Chinese tourists visited the US in 2013, and according to CLSA – Asia’s leading equity brokers and investment group – this number is expected to more than triple by 2020. It has also been found that Chinese tourists spend an average of $7,000 per trip to the US, making them the world’s biggest travel spenders.

Increased cooperation between the US and China is therefore being encouraged as a means of tapping into this rapidly growing tourism market. The annual US-China Tourism Directors Summit unites industry leaders from both countries to develop a deeper understanding of both markets and embark on bilateral industry alliances. Qualified American operators are now permitted to work with Chinese travel agencies in some provinces of China to arrange US tour packages for Chinese leisure travel groups.

The Arizona Office of Tourism (AOT) recently launched its first ever roadshow in Beijing, Shanghai and Guangzhou. It took place in January 2014, and brought together Arizona tourism suppliers with China-based trade and media representatives.

“We targeted the first-tier cities of Beijing, Guangzhou and Shanghai to conduct sessions with tour operators to familiarise them with our state – not only the iconic scenery such as Grand Canyon and Antelope Canyon, but also our many offerings from American Indian culture to western cowboy culture,” AOT media relations manager Kimberly Todd said.


Hospitality sector
Recent years have seen a significant increase in China-based investments in the hospitality sector, and all indicators point to an increase in hotel transactions, investment and development. Average daily rates are rising, as are hotel values, making new construction projects more appealing to potential investors.

Hazens Investment LLC invested $96 million (¥597.8 million) to purchase the 802-room Sheraton Gateway Hotel in Los Angeles, and Sichuan Xinglida Group Enterprises Co bought the Torrance Marriot South Bay Hotel for $74 million (¥460.7 million). The 244-room Crowne Plaza Los Angeles Harbor Hotel, the 151-room Hampton Inn Newark Airport, and the 349-room Wyndham Garden Hotel Newark Airport have all been acquired by Chinese investors.

In 2013, Hotel News Resource estimated that there was a 29% increase in rooms under construction, of which 66% were in the upper midscale and upscale segment. The new-generation hotel rooms are likely to be technologically advanced and environmentally friendly.

As the number of Chinese tourists flying into the US increases, hotels are revising their practices to appeal to the Chinese traveller. In April 2014, the New York Marriott Marquis hotel welcomed 1,500 guests from Amway China, who had won sales incentive trips to the city. In preparation, the hotel managing staff attended a Chinese cultural awareness course.

Many other lodging brands, such as Starwood and Hilton, are also working to make their hotels more appealing to Chinese travellers. The Hyatt Regency in Chicago has created a specific welcome programme for its Chinese guests, which includes making sure rooms are equipped with tea kettles with special teas and tea cups, a welcome letter, informative brochures in Mandarin, as well as a Chinese TV channel. The hotel also has translation applications on its iPads and iPhones, maintains a 24-hour hotline to a Mandarin-speaking translator, and tries to ensure that a Mandarin-speaking employee is always present.

In 2013, California’s tourism bureau partnered with Chinese actress Gao Yuanyuan to draw more Chinese tourists into the state. As a travel ambassador for California, the actress travelled to Los Angeles, Venice Beach, Napa Valley and San Francisco, taking pictures and posting updates on the Chinese social networking site Weibo. Engaging with potential tourists online has become more important as Chinese tourists are seeking more diverse and independently planned holidays.

Opportunities exist for American and Chinese firms to collaborate and produce targeted marketing campaigns, develop corporate training initiatives, and create promotional videos, bilingual tour brochures and websites.


Global tourism trends
With attractions such as the Hoover Dam, Yosemite National Park, Disney World, and a swathe of urban landmarks and historical sites, the US is a diverse travel destination. It has established 49 National Heritage Areas and the country’s history and culture is exhibited in a vast number of museums and galleries.

Wellness tourism is a $439 billion global market and the US has a large number of spas and resorts to meet growing demand. These travellers are looking to improve their health, happiness and productivity through activities such as yoga, qigong, cooking classes, volunteering and various fitness-boosting activities.

International business travel is also on the rise, with the Global Business Travel Association estimating a 3.8% increase on business travel spending last year. Though the US remains the leading corporate-travel spender, China is set to overtake it by 2015. The US would do well to attract these Chinese business tourists to its shores. A great number of convention spaces are available across the country, capable of hosting meetings, conventions and trade shows. In fact, convention space has doubled over the past 20 years.

In May 2014, Perfect (China) Co, a Chinese direct-marketing company, brought 7,000 of its professionals to the Californian city of Anaheim for a multiple-day convention. “We have taken 86 flights, stayed in 26 hotels, and according to Union Pay, our group attendees have spent $10,000 each this visit”, said Guowei Xu, vice-chairman of Perfect (China).

As China’s relationship with the US continues to evolve and China’s outbound tourism market continues to expand, travel exchange between the two countries will rise. Consequently, ample opportunities exist for both countries to form alliances and profit from this future tourism growth.


Industry perspective
Roger Dow, President and CEO, US Travel Association

China and the United States are global economic superpowers whose economies are intimately intertwined. The economic relationship has been based on collaborative US-China manufacturing relationships that span Asia and North America and deliver high-quality, low-cost goods to the entire world. As the economies of both nations have become increasingly sophisticated, services are taking the place of goods as a vital component of US-China economic cooperation.

Travel is America’s number-one services export, and China is the world’s fastest-growing outbound international travel market. The travel and hospitality industry is the next great frontier in strengthening US-China economic engagement.

Two years ago, US President Barack Obama announced a National Travel and Tourism Strategy for the United States that established the goal of attracting 100 million annual international visitors to America by 2021. Since the announcement, the US government has already made significant strides towards improving the visitor visa and entry processes for Chinese citizens arriving in the United States. Wait times for visa interviews at US consulates in China have been reduced and the United States is adding personnel to its customs inspection stations to reduce wait times for international passengers disembarking at US airports.

The result of these initiatives is more Chinese citizens visiting America. In 2013, 1.8 million Chinese people travelled to the United States – the fourth consecutive year of double-digit percentage annual growth. Our industry has seen firsthand this growing appetite for travel to the US. The US Travel Association’s IPW 2014, the travel industry’s premier international marketplace, welcomed 100 Chinese delegates this year – that’s up from just 14 delegates in 2009.

Travel by US citizens to China is also growing, and China has become an important tourist destination for American travellers. This mutually beneficial trade in travel services is cementing deeper economic ties between our two nations and opening up new investment opportunities.

As the travel facilitation improvements take shape, our industry has let both the US Congress and President Obama know that America must continue to do more. By opening doors and strengthening relationships, travel and hospitality can drive greater US-China cooperation and strengthen the critical bond between the world’s two largest economies.