Tuesday, July 26, 2016

Chinese Tourism and Hospitality Investment in the United States

July 25, 2016
Chinese Tourism and Hospitality Investment 
in the United States
Matt Snyder, Policy Analyst, Economics and Trade
Nicole Stroner, former Research Intern, Economics and Trade    
Executive Summary 

International Chinese tourism has expanded rapidly in the past 20 years. The United States has been a major beneficiary of this trend. In 2015, tourism accounted for 57 percent of all U.S. service exports to China and 15 percent of U.S. exports to China overall.[i] China's share of tourism spending in the United States has grown almost five-fold in less than ten years, increasing from roughly 3 percent in 2005 to more than 13 percent in 2015.[ii] Today China is the second-largest source of tourism spending in the United States and the largest source of international tourists globally. This increase in Chinese tourism has been driven by China's rising income levels and facilitated by U.S. and Chinese efforts to remove travel barriers such as insufficient U.S. embassy visa facilities and long waiting times for Chinese passports.

The United States has become a top destination for Chinese education and medical travel. Through the quality of its academic institutions, the United States attracts more Chinese students than any other country, and China is the largest source of foreign students in U.S. schools.[iii] The United States also appears to attract many Chinese citizens for medical procedures, particularly childbirth, and this trend may continue as Chinese birth travel to Hong Kong has recently become restricted.

Despite this growth, the future expansion of Chinese tourism faces potential limitations. Passenger aviation between the United States and top Chinese cities is nearing caps created by U.S.-China treaties. In 2015, U.S. airlines had only nine remaining weekly flights to China's three largest cities available to them under the U.S.-China Air Transport Agreement. Negotiations to provide more flights have been put on hold over concerns that U.S. airlines do not have fair access to take-off and landing times at Chinese airports. U.S. tourism vendors have also largely been unable to sell outbound travel from China despite Chinese joint venture programs designed to open this sector. In spite of these hurdles, there is potential for greater travel from China to the United States. More than three-quarters of Chinese tourists to the United States come from Beijing, Shanghai, and Guangzhou.[iv] As incomes rise in other cities, more tourists from more destinations may be able to travel to the United States.

In addition to the growth of Chinese tourism in the United States, looser Chinese restrictions on outbound investment have sparked dramatic growth in Chinese investment in the U.S. hospitality sector, which increased by an estimated factor of six in 2015 compared to 2014.
[v] Chinese insurance companies have dominated this investment, driven by a desire to secure stable foreign assets to diversify their China-heavy portfolios.