Recent news from China might be causing jitters among tourism industry executives counting on a surge in business from China's newly wealthy travelers. With gross domestic product growth slowing to 9% for the third quarter, the slowest rate in five years, the Chinese economy is starting to feel the effects of the global downturn. At the same time, China's tourism engine is showing signs of slowing. The number of Chinese tourists traveling to many overseas destinations fell in August; Hong Kong retailers accustomed to big-spending visits by mainland tourists griped about disappointing sales during the week-long National Day holiday in early October; and casino operators in Macao, the former Portuguese colony that depends largely on Chinese tourists, saw revenues fall to $890 million in September, a 3.4% drop from the same period a year ago and a 28% drop from the previous month.
On Oct. 20 the Macao government's gaming regulator reported that revenue for the city's casinos fell for the second straight quarter. According to the Gaming Inspection & Coordination Bureau, gaming revenue dropped 10%, to $3.25 billion. In what could be another sign of weakness, Las Vegas Sands (LVS) is reportedly putting on hold a plan to expand in Macao with four new hotels. Hong Kong's South China Morning Post on Oct. 20 reported billionaire Sheldon Adelson's company, which last year opened the giant Venetian Macao (BusinessWeek.com, 8/28/07) on the city's Cotai Strip, is calling off a proposed $5.25 billion fund-raising because of the credit crisis. A spokesman for Las Vegas Sands says the company abandoned plans to refinance a $5.2 billion loan package and is instead trying to raise just $2 billion to build two hotels.
The industry has been counting on a boom in Chinese tourism, both domestic and international. U.S. Commerce Secretary Carlos Gutierrez signed a deal with Beijing last December to ease restrictions on Chinese travel to the U.S. Given the growth of the Chinese middle class, that deal has the potential to translate into 579,000 visitors from China by 2011, according to the U.S. Commerce Dept. Other governments have signed similar deals. Even Taiwan, which for decades prohibited almost all visitors from the mainland, is now looking for an economic boost by opening to Chinese tourists."Long-Term Potential"
But does the current slowdown mean the Chinese tourism boom is suddenly in jeopardy? Peter Gowers, CEO for Asia Pacific at InterContinental Hotels Group (IHG), says there's still reason for optimism. Tourist numbers may take a hit as the economy slows and "there may be some slowdown in the pace at which hotels can be constructed," Gowers says. But, he adds, "we see great long-term potential to expand in China." With almost 100 hotels in the country, ICH is the largest operator in China, and it expects to double the number of hotels it operates there within five years. On Oct. 15 the company announced it will open six Chinese hotels with local property developer Shimao Group.
Other big foreign hotel operators are sticking with their expansion plans. Hilton Hotels (HLT), which has six hotels in China, opened one in Beijing on the eve of the Olympics; the company is scheduled to open another at the city's new airport terminal soon. By 2011, Hilton plans to open 17 more hotels in the country.