It’s been a week like no other and, while the world’s focus is on the effect of Trump’s tariffs on the global economy, at Guanxi, our business is travel and tourism, so here are our thoughts on the likely effect of developments on outbound travel from China. Not only as it might affect the USA, but also the rest of the world.
This week. The warnings.
To start, in case you hadn’t heard, the Chinese government issued two warnings this week about travel to the USA.
a. ‘Due to the deterioration of Sino-US economic and trade relations and the domestic security situation in the United States, the Ministry of Culture and Tourism reminds Chinese tourists to fully assess the risks of travelling to the United States and travel with caution’. (South China Morning Post)
b. Alongside, the Ministry of Education delivered a similar warning to international students to ‘conduct safety risk assessments when choosing to study in relevant states in the USA in the near future’. This is about the Ohio bill which targets diversity initiatives and speaks of clamping down on ‘foreign influences’.
These warnings have various effects:
1. Tour operators are receiving a clear message that promoting tours to the USA is not the ‘right thing to do’. They were already aware of this, but this is a more direct instruction (without being a direct instruction, if you get the gist?). Therefore, group tours to the USA will not be marketed openly.
2. FIT customers will not want to risk visa rejection so will likely opt for other destinations this year, especially those without compelling reasons to travel to the USA.
3. For group operators, filling last minute places on tours relies on smooth visa processing and a high % likelihood of visa approval. Why would operators take the risk of running tours to the USA when visa issues can really screw up profitability and cause major headaches at the same time?
4. The student market is going to be very deeply affected. Stories are circulating of Chinese students with visas to study in the USA who have actually had their visa decisions reversed by US officials.
5. As any consumer sentiment report on Chinese travel will tell you, safety is one of the top factors determining destination choice. Safety can cover all sorts of aspects of travel (crime, disease, health and safety etc) but being unwelcome and the risk of encountering an administration concerned with ‘foreign influences’ will be more than enough to deter Chinese tourists from the USA. This is going to hit the China-USA travel industry extremely hard.
6. Those with existing bookings may cancel. Don’t forget, Chinese OTAs have far more generous cancellation terms than other countries’ OTAs.
7. Going in the other direction, there is reluctance to leave the USA to travel to China amongst the Chinese diaspora. Will they be allowed back in? This issue will also affect business travel.
8. Ultimately all these elements will affect flight yield, route profitability, seat volumes and then, as fewer airlines operate these routes, prices will go up.
9. Those holidaymakers, international students, MICE groups and airlift are going to go somewhere else.
Where do we think they’ll go? Our forecasts as of today (which could all change tomorrow)
Students will head to the UK. Canada, Australia too. Or opt for a Chinese university.
Long Haul Holidaymakers will disperse far and wide, but the nature seekers might head to Australia, the South Pacific or the Nordics, the museum and heritage lovers Eastern Europe and the UK, and the those looking for a taste of the exotic may be heading towards Morocco, Turkey or the Middle East.
MICE – what do you think? Stay closer to home with the Asian favourites like Singapore and Thailand? Or replace the USA with Canada, Australia or a European country? Or maybe the Middle East will be the big winner here?
Leave your MICE predictions in the comments. Love to hear what you think.
Until next time…when I expect it will all have changed again.