New York City needs China's economy to bounce back

19-12-23

• New York City's tourism industry is showing signs of recovery post-pandemic.

• However, a full recovery won't happen until tourists from China return.

• Chinese visitors typically spend more, but the economy and travel limitations are keeping them home.

New York City's tourism industry is bouncing back, but one country is slowing down the recovery — China.

Though New York City hotel occupancy rates are nearing pre-pandemic levels, the recovery is hindered by a significant decline in Chinese tourists, who typically spend the most money and stay in the US for a whopping 12 nights on average.

Dan Krauth of WABC summarized his discussions with some hotel operators this week, noting that the tourism industry won't return to 100% until the Chinese market returns.

"What they care about is China," Krauth said. "That is the one market that hasn't returned yet. They stay the longest and spend the most money. "

China's economy is facing significant challenges. While not in an official recession, there are concerns that the country is heading for a financial crisis, thanks to a crumbling real estate market, loss of foreign investors, a slow re-opening following the COVID pandemic, and a shift in priorities from finances to power.

As a result, Chinese consumers are tightening their grip on their money with housing prices falling and prices for goods in deflation.

The biggest drop in visitors has come from China

In 2019, New York City had 67 million visitors, the 10th consecutive year in which it set a record, according to the office of the New York Comptroller. Those visitors generated about $68 billion in annual economic impact, including about $6 billion in taxes for the city, according to WABC in New York.

The New York City Tourism and Conventions office is projecting the number of international visitors to be about 80% of 2019's amount.

In 2019, 14 million people visited from outside the US, and about 8% were from China, according to the New York City Tourism and Conventions office. Only the UK, which represented about 10% of all tourists, had more.

This year, only 3% of international visitors, or about 390,000, are expected to be from China, down from the pre-pandemic levels of about 1.1 million annually. That is now 10th among all countries and less than half of the 1.1 million projected from the UK.

This year, there are signs that the tourism industry in the city is getting closer to pre-pandemic levels, including hotels. New York's hotel occupancy this year has averaged 87.5%, according to The City, which is on par with the rate before the pandemic.

However, that number is a bit misleading. The City notes that about 10,000 rooms are being used to house migrants. In addition, more than 40 hotels closed in the city during the pandemic and did not re-open, according to WABC.

Chinese visitors typically spend more than other tourists

The loss of Chinese tourists is especially hard on the tourism industry because of how much they spend.

In 2019, the average visitor from China spent $3,008, more than double the average UK visitor at $1,381. The total amount spent by Chinese tourists was greater than any other country, according to the state comptroller's office, representing about 14% of the amount from outside the US.

One reason for the high spending is the length of their stays in the US. According to research by the US Travel Association, the average Chinese visitor's trip to the US lasted for 12 nights prior to the pandemic.

To be sure, the problem is not limited to New York. In 2019, 3 million visitors came to the US from China and spent about $35 million, according to Skift, about 15% of the $235 million spent by international tourists.

The total number of US visitors from China is projected by the National Travel and Tourism Office to be about 30% of that level this year.

Chinese travel is hampered by the economy and travel limitations

People from China have still been traveling, but because of the country's struggling economy, they have opted to stay closer to home.

Fan Lei, the chief financial officer of Tongcheng Travel, told the South China Morning Post that people in China were buying fewer big-ticket items like real estate and cars and instead were spending more on domestic experiences.

That was also the case in the US this past summer, where people spent more money on things like concerts and movies.

Peter van Berkel, chairman of the International Inbound Travel Association and president of Travalco, a tour operator, spoke at A Better New York's panel this month on rebuilding international tourism and noted that people from China are struggling to afford international trips.

"It is unaffordable at this moment for people from China, for the average visitor to come to the US," van Berkel said. "Just this past year, we were talking about economy fares of more than $3,500 depending on time of year."

Prices for flights on US airlines to China are up in part because they stopped using Russian airspace following the invasion of Ukraine. That increased flight times require more fuel.

Making things even more difficult is that flights are still hard to find.

The US and China recently agreed to increase the number of round-trip flights between the two countries to 24 per week, double the number from earlier this year. However, Time reports that there were 340 weekly flights between the countries before the pandemic.

Author: Cork Gaines