Op-Ed | Why the Brexit Will Deter Chinese Tourists

As the United Kingdom continues to deal with the numerous economic and political ramifications of the recent “Brexit” referendum on its EU membership, one of the current government’s big diplomatic successes since its election last May is under threat of being undone; namely the windfall in tourism receipts it was due to expect following Prime Minister David Cameron’s announcement of streamlined visa policies for Chinese tourists made during Xi Jinping’s October 2015 state visit to the UK. The Chinese President’s visit generated enormous publicity in both China and the rest of the world. Media referred to the newfound bond between the two countries in terms such as “golden relationship,” “best friends,” and “special relationship,” but, with the UK now being on track to leave the European Union, the new situation the British have now found themselves in risks making them too special for a mutually beneficial “special” relationship between the two countries. One of the most celebrated outcomes of the state visit was the introduction of a new visa regime for Chinese tourists; quadrupling the visa validity period from six months to two years, and introducing 10-year multiple entry visas for Chinese tourists. The special attention given to Chinese tourists was questioned in the media, but skeptics’ concerns were quashed when the stunning growth of Chinese arrivals to the UK and their exorbitant spending during their visits was highlighted. Indeed, Chinese tourism to the UK saw a 47.2 percent boost in 2015 (COTRI data), swelling from the 152,000 arrivals in 2014 to a total of 223,000 the following year, with an average spend of GBP 2,688 per visit (UK government data). Painting a promising picture of Chinese tourism, Downing Street described it as an important engine for growth, claiming that every 22 Chinese visitors generate an additional job in the UK job market. Nevertheless, reality paints a different picture: the United Kingdom is an underperforming tourism destination for Chinese visitors. Putting the UK’s “impressive” arrival number of 223,000 in relation to its European peers shows a different story; France saw close to 2.5 million Chinese visitors in 2015, Germany was visited by 1.4 million Chinese travelers, and even the Czech Republic beat the UK with 287,000 visitors in 2015. As anyone who has visited the UK or even just watched the London Olympics in 2012 can testify, the UK is not short of exciting touristic offers—so what has been hampering Chinese arrivals to the tourism powerhouse that is the UK? The key part of the equation is, as you may have guessed, visas. The UK, even before the forthcoming Brexit, was already only “half-inside” the EU: not using the Euro, nor participating in the border-free Schengen Area, and thus requiring a different visa than most of its European peers. As a result, a Chinese tourist doing a typical multi-country visit to Europe that includes the UK will require two visas: a Schengen visa and a UK visa. This complicates matters even further if the UK is “in the middle” of a tourist itinerary. For instance, if a Chinese tourist were to travel on the following route: Germany—Belgium—United Kingdom—France, they would require a Schengen visa for the first Schengen entry in Germany, a UK visa as they entered the United Kingdom, and an additional Schengen visa for their re-entry into the Schengen Area in France. This adds confusion and another level of complexity for what would otherwise be a seamless, integrated trip throughout Europe. Now, a likely scenario in a post-Brexit world makes what is now only a bureaucratic problem into a shopping problem as the probable exclusion of the UK from the European Customs Union (EUCU) will introduce customs duty and VAT to these border crossings in addition to the several visas required. In a post-Brexit Europe, the aforementioned Chinese traveler would not only require three visas, but would also have to pay customs duty and VAT three times: when entering the UK from Belgium, when re-entering the EU in France, and finally when returning home in China. Of course, the likely real-world result of this would be that this particular Chinese traveler would do all their shopping after entering the EU the last time, depriving UK of the much-needed stimulus that Chinese tourism spending would represent. Perhaps even more likely, however, is that the UK would simply excluded from such travelers’ itineraries – reducing the required visas to one and making shopping smooth and worry-free. The UK has actively, and successfully, attempted to counteract the negative effects of not being part of the Schengen Area with strong marketing campaigns in China, as well as subsidizing “Chinese Tourist Welcome” training for service providers in the UK tourism industry, and improving visa policies for Chinese nationals. Alas, the welcoming embrace of the UK tourism industry may appear significantly less welcoming when accompanied by customs officers eager to search through Chinese tourists’ suitcases for luxury goods purchased in mainland Europe. To add insult to injury, Chinese tourists are generally very risk-averse and plan their trips in detail—but the unclear situation following the British referendum leaves both the Brits and the Chinese with more questions than answers: What will the exchange rate be like when I am visiting the UK? Do I dare to include Scotland in my itinerary? Should I plan any shopping in Harrods or should I save it for Champs-Élysées and Galeries Lafayette? These uncertainties are only magnified for Chinese (group) tour operators which plan and book their itineraries long before the intended departure dates. With continued currency fluctuations of the British pound, the perceived risk is naturally very high. If hotels, tickets, and services are booked and paid for by the tour operators at present time and the pound slides another 15 percent before the date of departure, the tour operator will find it very hard to compete on price in what is already a very competitive market. The sudden fall of the pound may prompt a temporary boost in Chinese tourists looking to take advantage of the improved exchange rates to the Chinese yuan to buy some luxury products in the UK, but this sudden “sale” will quickly dissipate as imports get more expensive for UK-based retailers due to the weakened purchasing power of the British pound. In the end, most Chinese people do not travel halfway around the globe to visit one particular country, no matter how great Great Britain markets itself to be. Daniel Meesak is the chief operating officer of the China Outbound Tourism Research Institute (COTRI), and can be contacted at meesak@china-outbound.com.

Op-Ed | Why the Brexit Will Deter Chinese Tourists

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Published July 05, 2016

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Op-Ed | Why the Brexit Will Deter Chinese Tourists