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2 significant barriers slow the growth of Chinese tourism
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Global tourism has been growing steadily at almost 5 percent per year in the past decade, with 930 million international arrivals in 2008.

And always around the corner lies the next potential tourism gold mine.

In the 1950s and 1960s, it was America, as US tourists surged into Europe, Asia and elsewhere. In the 1980s, the Japanese first began to travel in large numbers, and in the late 1980s and early 1990s, travelers from South Korea and China's Taiwan began to travel en masse, lifting the profit margins of hotels and airlines throughout Asia and the world.

And now, the latest - and perhaps the greatest - potential tourism gold mine has been identified: the Chinese mainland. The optimism is fueled by remarkable numbers: In 2000, 10 million Chinese traveled abroad, but in 2008, over 45 million traveled overseas.

But, given the fickle nature of tourism, there are some strong caveats.

Visas remain a problem, the global downturn is a worry and the extent to which the Chinese government will further loosen restrictions on outbound travel is a lingering question mark.

Despite the growing numbers of tourists, two significant barriers have combined to slow the growth of Chinese tourism: government red tape and the global economic downturn.

Government red tape occurs both inside China and in the destination countries. Chinese citizens must get approval from within China to travel abroad, and they must obtain a visa from the country that they wish to visit.

Travels to Europe and the US are quite difficult. Since mid-2008, the Chinese have been allowed to travel to the US in registered tour groups, after passing a rigorous visa process that often includes interviews, but prior to that, they are required to secure hard-to-get business or student visas.

Even now, the US has put in place rigid quotas that allow only a very gradual increase in the number of Chinese tourists in the next few years.

"It takes time to build up the mainland market," says Stanley Yen, president of Landis Hotels and Resorts, which manages eight hotels and resorts in Taiwan and two hotels in the Chinese mainland. "It's not like you just open a tap and water comes out."

Perhaps the largest threat to the continuing growth of Chinese outbound tourism is the worldwide economic slowdown, which has already caused global tourism to slow sharply.

However, analysts believe the current slowdown in Chinese tourism is temporary, because to a large extent, China has weathered the global economic downturn better than most countries.

"Outbound tourism is declining, because income growth has slowed down and people have become more conservative," says Peng Wensheng, head of China research at Barclays Capital in Hong Kong. "But over the long term, the trend is clearly for China's tourism market to increase further."

In macro terms, China's outbound travel market is driven by powerful demographics. Its 1.3 billion people are becoming steadily wealthier, and they are increasingly free to travel outside the country.

"Three factors are driving outbound tourism from China," explains Peng. "One is income growth, and with per capita GDP of around US$3,000, you have a growing middle class. A second factor is appreciation of the yuan not only against the US dollar, but also against the yen and most other Asian currencies. A third factor is the steady relaxation on travel restrictions by governments throughout Asia."

Per capita spending on tourism in China is still very low, at just US$30 per year, compared with a global average of US$100, and an average in the US and Europe that is many times higher.

"This current downturn is temporary," says Franck Lafourcade, general manager of Sofitel Hyland Shanghai, and an industry veteran who has worked in Asia for 20 years. "The Chinese market is there, and we are going to have more and more Chinese traveling the world. Overall, I am very positive about China tourism."

(Shanghai Daily June 8, 2009)

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