This week during the APEC summit, U.S. President Barack Obama announced the signing of a reciprocal visa agreement with China that will increase the validity of short-term tourist and business visas from one to 10 years, and student and exchange visas from one to five years. For tourists and businesspeople that regularly travel between China and the United States—and the businesses that serve them—the agreement has been hailed as a positive step in U.S.-China relations.
Given the growing economic ties between the two countries, these moves are something of a no-brainer. China remains the world’s fastest-growing outbound tourism market, and one of the 10 most important for the United States. Last year, 1.8 million Chinese nationals visited the United States and spent some $21 billion, in the process supporting an estimated 109,000 American jobs. By 2021, these figures are expected to balloon to 7.3 million Chinese travelers spending $85 billion annually and supporting up to 440,000 U.S. jobs.
Although the United States remains near the top of the list of Chinese tourists’ most-desired international travel destinations, only around 2 percent of outbound Chinese travelers visit the United States each year. According to surveys of Chinese outbound travelers, ease of obtaining visas is a leading factor in deciding which countries to visit, making a supportive U.S. visa policy key in remaining competitive with global travel markets such as the EU, Japan, and South Korea.
The new agreement is also a boon for Chinese international students in the United States, and the universities and businesses that cater to them. Currently, Chinese students account for nearly 30 percent of all foreign students in the United States, and this group has become an important consumer demographic, having spent an estimated $8 billion last year—a 24 percent increase over 2012.
Overall, this new agreement is a positive step for tourists, students, retailers, and tourist destinations alike—good for business in the United States and in China. But more specifically, we expect the moves to build on the following trends:
- The United States will see more repeat Chinese tourists: The significant lengthening of tourist visas from one year to 10 years will make it even easier for Chinese tourists to plan repeat trips back to the United States. This will result in a growing number of experienced tourists who are more likely to travel individually, rather than on Chinese tour groups. These repeat visitors will be more sophisticated and naturally seek out unique experiences off the typical Chinese tourist track.
- Chinese students will remain important influencers: With student visas extended to five years from the current one year, students will be able to become even more integrated into the local communities—and will exert enhanced influence over travel and shopping decisions. This trend cuts both ways, as well: the new visa rules will allow both Chinese and American students to travel back and forth with greater ease than ever before, encouraging more American students to opt for China as a destination for studying abroad, and building greater people-to-people ties.
- Chinese investment in the United States will continue to grow: Regardless of industry—whether it’s real estate, movie deals, or natural resources—investment from China (and trade between the United States and China) continues to grow year-over-year. The relaxed visa process will make it easier than ever for businesspeople to travel between China and the United States, incentivizing Chinese investors in particular to lay down partial roots in the United States (supporting jobs, boosting business, and nurturing deeper ties).
Given this exciting new landscape, tourism destinations and retailers should consider the following strategies to capture this opportunity:
- Increase focus on individual travelers: While it was once enough to simply target Chinese tour groups, destinations and retailers need to expand their thinking to actively and directly target individual Chinese consumers. Since it is far from easy to generate impact in this very crowded and expensive market, destinations need to think creatively and launch unique and compelling campaigns that hit the right target market.
- Invest in CRM: Destinations need to think of tourists not as only one-time visitors, but as extremely valuable relationships to foster over the long term. Destinations should be looking to WeChat and other methods to cultivate these relationships that build repeat visits while generating valuable word of mouth referrals.
- Content is king: Chinese consumers are becoming very savvy and are constantly searching for compelling content. They are no longer as willing to simply view static advertisements—they want to learn about and engage with your brand as a global, educated consumer.
With the right strategies and insight into the motivations and habits of China’s outbound traveler, student, or businessperson, American retailers, brands, hoteliers, and tourist destinations can ensure these new extended visas are put to good use—on numerous repeat visits by loyal customers.
Renee Hartmann is the co-founder of China Luxury Advisors.