China’s corruption blitz hits some US travel companies

on November 17 2014 | in Daily Headlines Trending | by | with No Comments

Chinese President Xi Jinping’s crackdown on government corruption, which began almost two years ago, has had a profound impact in China itself. Luxury goods sales have suffered, officials now shun lavish banquets, and gambling revenues at casinos in Macau have been sinking. Even sales of boxes of cookies and cakes around holiday times have been hit.

It is also hurting a specialized niche of the U.S. tourism industry.

In some parts of China there are new restrictions on the kinds of overseas travel by central and local government officials that will be allowed, according to officials in several Chinese cities and U.S. companies who handle travel arrangements for government trips. Often it isn’t a new rule that is proving to be a barrier but widespread fear that an overseas trip will attract the wrong kind of attention from the government teams investigating corruption. The probes have already led to the detention of thousands of officials and have a particular focus on those who may have moved suspicious amounts of money overseas.

China’s state news agency Xinhua reported in January that the number of officials who traveled overseas for training approved by the State Administration of Foreign Experts Affairs fell by 32 percent in 2013. The body approves trips below ministerial level.

International “training” trips, meant to help Chinese officials learn about business and government practices in other countries, are not only less frequent, they are also shorter and there is a lot less room for leisure time.

“In the past, most of these trips have been one day of official business and 10 days of travel,” said Sage Brennan, co-founder of the Los Angeles-based consulting group Luxury China Advisors, which consults clients such as luxury retailer Bergdorf Goodman and the Los Angeles Tourism and Convention Board on how to attract Chinese consumers. “Those kinds of trips have disappeared.”

Brennan estimates officially sanctioned Chinese government travel to the U.S. fell by as much as 90 percent in the first half of 2013, and hasn’t recovered much since.

Some hoteliers in New York have seen a drop off in Chinese government guests. The Sheraton LaGuardia located in Flushing, Queens, New York City’s biggest and fastest growing Chinatown, had several official delegations cancel their reservations in October, said Karen Ng, head of sales for the hotel.

In recent years, the balance has swung more towards private tour groups and even individual tourism as the number of people with the private means to travel soars along with China’s economy. It means that while the drop off in official trips may be hurting some tour operators and hotels, the overall impact is more than offset. Indeed, Chinese tourists visiting the U.S. in July 2014 jumped 22 percent over July 2013, according to the latest figures from the U.S. Department of Commerce.

Read more at CNBC.

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