A new battlefront has opened in the trade war between the United States and China: the $1.6 trillion U.S. travel industry.
A Los Angeles hotel long popular with Chinese travelers saw a 23% decline in visits last year and another 10% so far this year. In New York City, spending by Chinese tourists, who spend nearly twice as much as other foreign visitors, fell 12% in the first quarter. And in San Francisco, busloads of Chinese tourists were once a mainstay of one fine jewelry business; over the past few years, the buses stopped coming.
Figures from the Commerce Department's National Travel and Tourism Office show a sharp decline in the number of tourists from China last year.
Industry professionals worry that the drop-off is picking up speed this year, affecting not just airlines, hotels and restaurants but also retailers and attractions like amusement parks and casinos.
Tori Barnes, executive vice president for public affairs and policy at the U.S. Travel Association, a trade group, said the Chinese were especially valuable because they were spending an average of $6,700 during their stays -- 50% more than other international visitors.
"International travelers actually help reduce the trade deficit," Barnes said. "There isn't as much thought given to the services industry being an export," but, she added, it is a significant one.
According to data from the National Travel and Tourism Office, 2.9 million Chinese travelers visited the United States in 2018, down from 3.2 million in 2017.
This year's rate is probably even lower, said Adam Sacks, president of Tourism Economics, a consulting company. "It's not getting better in 2019," he said. "The risk is that it gets worse."
Sacks added: "If you look at the previous decade, Chinese travel increased at an annual average growth rate of 23%. Then it stops on a dime and begins to retrench in 2018."
He pointed to what he described as "case study of this happening in the past, where China has essentially weaponized tourism." In 2017, Chinese travel to South Korea fell by nearly 50%, he said, after South Korea deployed a missile defense system that China said could be used to spy on its territory.
That example was cited in a Bank of America Merrill Lynch report last week in estimating a "worst-case scenario" of as much as a 50% decline in Chinese travel to the United States. Its analysts said that could mean a $18 billion hit to the U.S. travel industry.
The decline in Chinese tourism may be tied, in part, to a slowdown in the Chinese economy, which has left consumers with less money for discretionary spending. But travel industry professionals, international trade experts and economists say the bigger factor is the trade war and the inflammatory rhetoric associated with it. They say Beijing may see its sizable population of global travelers as a cudgel in its battle with the United States.
"That is a real threat to the U.S., if the Chinese run out of options," said Jan Freitag, senior vice president at the travel research and data firm STR. "China has only so many things they can put a tariff on. The one thing where they have leverage is tourism outbound."
Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, said Beijing's tight grip on domestic media also gave it a pronounced advantage. "You have a political climate in China where the government-led press has clearly been hammering this issue," he said.
Michael O. Moore, professor of economics and international affairs at George Washington University, agreed. "That is potentially an enormous advantage in a conflict if you can control the message, without question," he said. "There's an increasingly patriotic spin to everything and the U.S. is portrayed in a negative light, and that can play a role in people's decisions."
Big gateway cities in the United States benefited the most from the rise in Chinese tourism and are on the front lines of the fall. "For right now we're holding to our 2018 numbers, but we are starting to see some indicators that are starting to show some softening in the first quarter," said Christopher Heywood, executive vice president of global communications for NYC & Co., the city's tourism marketing organization.
Heywood said Chinese tourists in New York City spend roughly $3,000 per person in the five boroughs, nearly twice what other foreign visitors spend.
Hotels are also caught in the crossfire. Mark Davis, president and chief executive of Sun Hill Properties, which owns the Hilton Los Angeles/Universal City, a popular destination for Chinese tourists, said that business had been improving through 2017 but fell last year and was weakening further so far this year.
"The general messaging from the U.S. has been a little unfriendly at times," Davis said. "The posturing, I think, has people worried."
Even businesses that are more peripheral to tourism have seen sales to Chinese visitors dwindle. After the recession left the U.S. dollar battered and the country a relative bargain for overseas tourists, the United States was an attractive destination for the Chinese.
"It sort of started in 2009 for us. We started to do some Chinese-tourism business and it really just started to take off," said Lane Schiffman, co-owner of Shreve & Co., a fine jewelry retailer with stores in San Francisco and Palo Alto, Calif.
Schiffman estimated that his overall international tourist business fell to 10% from 30% over the past few years.
"It seemed like maybe the Chinese government put pressure on people not to buy so much outside of China," Schiffman said. "It's kind of like they turned the faucet off."
Business on 06/13/2019