Will the Return of Chinese Tourists Revive American Luxury?

What Happened: The holiday season could look a lot more crowded this year. Starting in November, the Biden administration will lift restrictions on foreign travelers entering the US provided that they are fully vaccinated against COVID-19 and test negative within three days of entry. The decision, announced on September 20, ends the 18-month ban on travel from 33 countries, which includes members of the EU, UK, and China. This comes after the EU eased travel restrictions on Americans in June and put pressure on Washington to reciprocate. 

The Jing Take: Besides welcoming back separated family members and expatriate workers, the changes will likely bring the biggest relief to tourism. According to the US Travel Association, the US economy lost nearly $500 billion in travel spending and $1.1 trillion in economic output due to COVID-19. In New York City alone, which boasted the highest share of foreign visitors pre-pandemic, the lack of tourists wiped out roughly 89,000 jobs and $60 billion in revenue.

Not only is Biden’s move good for airlines — which saw their shares rise on Monday ​​— but for retail and entertainment as well, particularly given the lifted ban on Chinese tourists. In 2018, Chinese travelers spent nearly $277 billion around the world, of which more than $36 billion was splurged in the US. Although bilateral relations have soured since the start of the pandemic, North America remains among the top three destinations favored by Chinese consumers, offering a promising boost to US-based businesses. 

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That said, celebrations should come with caution. Although the US is requiring proof of vaccination and plans to implement contact tracing for 30 days, the country does not have a great track record of keeping COVID-19 under control. In fact, US deaths due to the virus average out to 1,900 per day and barely over half of the population is fully vaccinated. This raises concerns about another post-holiday surge of cases: Could US-bound travelers contract the virus and take it home, slowing down global recovery efforts? 

Doomsday scenario aside, luxury can remain optimistic. According to Bain & Co., personal luxury goods consumption in the states has already “exceeded expectations,” thanks to increasing consumer confidence and a fast vaccine rollout. Coach and Kate Spade-owner Tapestry, for one, recently reported 165 percent growth over last year in North American sales, helping it reach $1.62 billion in revenues in Q4. But even without an influx of Chinese tourists, luxury houses have learned to adapt to a volatile retail landscape. Now, the increased foot traffic at their American flagship stores would just be the cherry on top.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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