Argument

The Decline of the Western Tourist

Citizens of China, India, and other emerging markets are traveling for pleasure in ever greater numbers — and the rest of the world is competing for their money.

Chinese women with flotation rings adorned with colours of the US flag stand on the beach in Qingdao, eastern China's Shandong province on July 24, 2015. AFP PHOTO / FRED DUFOUR        (Photo credit should read FRED DUFOUR/AFP/Getty Images)
Chinese women with flotation rings adorned with colours of the US flag stand on the beach in Qingdao, eastern China's Shandong province on July 24, 2015. AFP PHOTO / FRED DUFOUR (Photo credit should read FRED DUFOUR/AFP/Getty Images)

Tis the season to go to Ibiza. Or Bali. Or Miami, or maybe just pack the car, round up the kids, and go to a nearby beach. August is, after all, vacation month in much of the Western world and is also vital to the bottom line of the global travel industry, one of the most unheralded economic engines in our world today.

Those sunburned Germans on Thai beaches, British package tourists in Dubai resorts, or selfie-taking Americans in Venice are not only having a holiday but contributing to the global economy. According to the World Travel & Tourism Council, the industry accounts for more than 10 percent of global GDP and nearly 300 million jobs.

But the picture we get of global travel from glossy magazines — of mostly white Westerners experiencing “exotic” locales — fails to capture the biggest story in travel over the last decade: the rising tide of international travelers from the emerging world. The rise of “the rest” is now a travel story, too — and a potentially transformative one.

As middle classes grow across emerging markets, they have developed the middle-class taste for a holiday. According to a wide-ranging Credit Suisse survey, most people in emerging markets rank spending on holidays at or near the top of the list of things they aspire to spend money on. From China to South Korea, Malaysia to India, Asia is witnessing an international outbound travel boom.

As with all emerging market trends, China is the leader. According to the U.N. World Tourism Organization (UNWTO), the number of Chinese outbound travelers hit some 135 million last year. The Chinese traveler has surpassed the American traveler as the biggest force in the industry, beating Americans in total outbound numbers and in spending. Last year, according to the UNWTO, Chinese international travelers spent $261 billion — larger than the entire GDP of Greece or Portugal.

A rising number of those travelers have come to the United States, spending some $33 billion in 2016, according to the U.S. Commerce Department. The Chinese — thousands of miles away — are well on their way to becoming the third-largest visitor group to the country, after Canadians and Mexicans, respectively.

While President Donald Trump rails about the U.S. trade deficit with China, U.S. travel industry professionals are busy wooing Chinese travelers. At travel industry conferences in the United States, there is the inevitable breakout session on “how to attract the Chinese traveler.” The one-word answer is: shopping. According to the Commerce Department’s National Travel and Tourism Office, shopping ranks No. 1 among traveler priorities, followed closely by sightseeing and fine dining. The Chinese traveler also tends to favor the coasts, with California and New York the No. 1 and No. 2 states, respectively, accounting for some 70 percent of all market share. Los Angeles is the most oft-visited city, according to Commerce Department numbers.

U.S. hotels were early pioneers in catering to Chinese tourists with tea kettles, Chinese-language menus, and familiar food items such as congee (rice porridge) and noodles showing up in hotel restaurants. This month, Maryland-based Marriott International announced a joint venture with the Chinese e-commerce behemoth Alibaba Group targeting the Chinese consumer. Alibaba, the world’s sixth-largest retailer, also owns Alipay, the online payments service that conducted $1.7 trillion in transactions last year (yes, trillion). Marriott is not alone. Caesars Palace in Las Vegas allows its Chinese guests to pay for their rooms on China-based WeChat’s digital payments platform, Alipay’s main competitor. Meanwhile, Virginia-based Hilton Worldwide has launched a Chinese-targeted program known as “Hilton Huanying,” derived from the Chinese word for “welcome.”

India, too, is rising in international travel. From some 20 million international travelers today, the UNWTO sees a possible 50 million Indian travelers by 2020. India’s young population and growing middle classes ensure a steady stream of outbound travelers. Top travel destinations include Singapore, Dubai, Bangkok, Paris, London, and New York. Countries such as Jordan, Australia, and Israel are also making it easier for Indians to get visas.

Indian travelers to the United States broke the million mark in 2015 and now number 1.1 million. Since 2009, the U.S. market has seen a 113 percent rise in the number of Indian travelers, according to the Commerce Department’s India report, though these numbers are tilted more toward business travelers than leisure ones. Like Chinese leisure travelers, Indians cite shopping and sightseeing as the top two reasons for leisure travel to the United States.

All told, Asia’s large economies could spend up to $365 billion annually in travel by 2025, according to figures provided by Visa. That’s triple the amount forecasted to be spent by American travelers in the same year, and Asia’s dominant demographics suggest this gap will likely widen. By 2030, nearly 60 percent of the world’s population will live in Asia. Add Africa to the mix and you have some 77 percent of the world’s population in those two regions.

“To travel,” Aldous Huxley once quipped, “is to discover that everyone is wrong about other countries.” A new generation of Asians is discovering their own continent and maybe discovering that old stereotypes or state propaganda hardly reflects the truth. While hard to pinpoint, the explosion in intra-Asian travel over the past decade could have a similar effect as the explosion of intra-European travel since the fall of the Soviet Union and the rise of the European Union: a generation of Germans and English and French and Scandinavians who know and understand each other better and are less likely to resort to national stereotypes. This is not a small thing for a continent that has given us two of the deadliest wars in the past century. The Erasmus pan-European student exchange program is particularly credited with building a European identity among young people.

To be sure, geopolitics still plays a role in Asia travel, and Chinese tourist numbers to Japan and South Korea ebb and flow with the political temperature, but the genie is way out of the bottle. But make no mistake: South China Sea tensions will not go away because Chinese like to shop in Tokyo, but, over the long term, this level of interactive travel will lay the social groundwork for a more peaceful Asia.

What’s more, easy access to air travel has, in the words of University of Hong Kong professor Max Hirsh, “fundamentally reshaped the mental map of Asia’s urban middle classes.” Their mental map is far more expansive and confident. This confidence contributes to what might be viewed as a hope gap dividing the West and the rest. This time, the hope gap has shifted, and the balance is tilted toward “the rest.” According to the Pew Research Center, people across emerging and developing countries are more optimistic about their future than Americans or Germans or French. This might be because middle classes are growing across the emerging world, especially in Asia, while they are faltering in the West.

While this might be seen as a good news story in the emerging world, there’s a darker side to this as well. Rising middle classes have rising expectations, and, when unmet, uprisings can ensue. In some ways, the Arab uprisings played to this script. It’s much more difficult to grow a mature middle class than build one from a poverty-stricken country with nowhere to go but up.

Finally, what of local tourism industries in places like China and India? Will they lose out to the Londons and New Yorks or to the Hong Kongs and Dubais? As China shifts its economic focus toward domestic consumption, national tourism could be a significant boost. The answer to that question may lie in the sheer numbers and in global competition. With numbers like India’s and China’s, there is plenty to go around, but tourism industries in both countries will need to step up their game, targeting local tourists rather than always looking to the Western traveler.

It should come as no surprise that the emerging-world consumer is reshaping the travel industry. They have already reshaped industries including smartphones, spirits, cars, and commodities, among many others. Rapidly urbanizing middle classes from Karachi to Kuala Lumpur, Johannesburg to Jakarta, have become engines of consumption growth. As the Brookings Institution scholar Homi Kharas notes, from 2015 to 2030 middle-class consumption worldwide could grow by $29 trillion. Only $1 trillion of that added spending, Kharas notes, will come from the advanced economies. The rest will come from, well, “the rest” (and mostly Asia).

The rise of the traveler from the emerging world is also reshaping the aviation industry. The International Air Transport Association estimates that by 2036, 7.2 billion passengers will fly annually, up from 3.8 billion today. More than 50 percent of that growth will come from the Asia-Pacific region, and two-thirds of air travel growth in that period will come from emerging markets — often on emerging-market carriers (another global travel industry disruptor).

By 2024, China will surpass the United States as the world’s largest aviation market, measured by both internal and external travel, and, one year later, India will jump ahead of the United Kingdom into third place. This shift in travel should not be underestimated. As late as the end of the 20th century, Chinese travelers hardly ventured beyond their own shores or Hong Kong and Macau. At this same time, international vacation travel for the middle-class Indian was rare. For most Asians, travel was exotic, a luxury.

According to HSBC, Chinese travelers could number 224 million by 2024, and five U.S. cities are among the top 10 fastest-growing destinations for Chinese travelers, according to Oxford Economics.

The rise of the Chinese traveler is of a piece with three trends that are changing the world: growing middle classes in the emerging world, rising connectivity (both physical and technological), and rapid urbanization. With more than 85 percent of the world’s population living outside of North America and Europe, it’s no wonder that the future growth of travel will depend on rising middle classes in Asia, Africa, and Latin America — and none will be more important than China.

Connectivity has become a buzzword in talk of globalization, where it often refers to internet connectivity and global supply chains, but the air connectivity of the past quarter-century should not be discounted, and it’s bringing Chinese to the world in ways unimaginable a generation ago.

Another U.S.-based hotel group sees the writing on the wall. It has been actively courting the Chinese traveler with Chinese-language welcoming notes and red envelope specials during the Lunar New Year. That hotel group? Trump Hotels.

Business is business, after all.

Photo credit: FRED DUFOUR/AFP/Getty Images

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