THIRD U.S.-CHINA TOURISM WORKING GROUP HELD IN SANYA

UNCLAS SECTION 01 OF 03 BEIJING 000312

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SUBJECT: THIRD U.S.-CHINA TOURISM WORKING GROUP HELD IN SANYA


1. (SBU) SUMMARY: The Third U.S.-China Tourism Working Group (TWG)
meeting under the Joint Commission on Commerce and Trade (JCCT) was
held on January 13, 2010, in Sanya, China, chaired by U.S. Deputy
Assistant Secretary for Services Joel Secundy and Vice Chairman Zhu
Shanzhong of the China National Tourism Administration (CNTA). The
two sides highlighted recent achievements, which included a doubling
of approved CNTA travel agents and an increase in Chinese visitors
to the U.S. in 2009, in spite of the economic crisis. CNTA raised a
range of service quality issues and infrastructure concerns such as
airport seating and bilingual signage. The U.S. responded that some
service issues stemmed from the price sensitivity of Chinese
tourists, and raised its own concerns about Chinese agents using
non-approved U.S. agencies and limits on direct advertising and
promotion in China. The chairs signed a 2010 Work Plan which
includes tourism export promotion and a Tourism Directors Summit.
The next working group meeting will be held in the United States.
END SUMMARY.


2. (SBU) U.S. and Chinese delegations met in Sanya, Hainan, China on
January 13, 2010 for the Third Tourism Working Group (TWG) meeting
under the Joint Commission on Commerce and Trade (JCCT). The
meeting was chaired by Deputy Assistant Secretary for Services, Joel
Secundy for the United States and Vice Chairman Zhu Shanzhong on
behalf of the China National Tourism Administration (CNTA). VC Zhu
explained the choice of venue was due to a new State Council
decision to make Hainan into a world-class "International Tourism
Island," under which the island would enjoy preferential policies,
including new duty free privileges. Zhu observed, however, that
island infrastructure was inadequate, and that it would take a lot
of work to turn the proclamation into a reality.


3. (SBU) VC Zhu noted that the working group's efforts have helped
increase U.S.-China tourism. Although U.S. tourists to China
dropped 5 percent from January to November 2009 to 1.58 million,
Chinese tourist to the U.S. actually rose 5 percent during the same
period to 760,000. (Note: These statistics only measure tourists
travelling on direct flights.) DAS Secundy noted the positive
effect that rising Chinese tourism was having on the balance of
trade in tourism, and encouraged the working group to continue the
momentum of progress.


4. (SBU) Mr. Long Wei, Manager of Travel Agencies for the CNTA began
the Chinese introduction, declaring 2010 the "year of improving
travel agencies." Long said China had 1.2 billion (potential)
domestic tourists and the country was receiving much attention from
around the world with promotions for outbound travel. Between
August 2008 and December 2008, 316,000 Chinese tourists made the
United States their first overseas stop, on average 63,200 per
month. Between January and November 2009 the number was 760,200, or
69,100 per month, a 10 percent increase. (Note: These statistics
measure person/trips, so the same individual may be counted more
than once).


5. (SBU) Long observed that with the recent expansion of the Tourism
MOU, 700 Chinese travel agencies are authorized to book package
tours to the United States; roughly 70 percent of the total number
of travel agencies with CNTA approval. But Long admitted that group
travel under the MOU was not as much as he had expected. Long
presented a case study for Jilin Province that sent 220 groups for a
total 3,000 people to the United States on a variety of 6-14 day
package tours to the mainland and Hawaii, with the cost ranging from
RMB 10,000 to 25,000 (USD 1,466 to 3,665). Long also discouraged
U.S. industry from starting a pricing war, but rather encouraged
them to emphasize good service.


6. (SBU) Long also raised a list of problems cited by CNTA travel
agencies with U.S. tours. Price competition among land operators
resulted in lower service quality -- some firms had drivers double
as the tour guides, subcontracted without monitoring quality, or
took tourists only to shops which offered the U.S. agent a sales
commission. U.S. travel focuses too heavily on the east and west
coasts, with few opportunities in other regions. Airline
overbooking causes problems for tour groups. At airports, seating
is insufficient and warning signs are almost never offered in
Chinese. Finally, Chinese visitors are unaware of tourism resources
in the U.S. due to the lack of promotion in the Chinese market.


7. (SBU) Long said CNTA would like to intensify tourism promotion
campaigns (especially for tailored tourism),and he asked the U.S.
to provide more information on our legal framework and safety. He

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also hoped the U.S. government would pay more attention to tourism
issues. CNTA continues to track problems Chinese tour operators
encounter with U.S. land operators, and asked the U.S. delegation to
find ways to monitor these groups to eliminate issues with
inadequate vehicles, bad guides and misrepresented shopping
experiences. Long also expressed hope that the U.S. would work to
improve the Chinese language resources at tourist destinations and
provide more convenient services to Chinese tourists interested in
travel to the southern and central parts of the U.S. CNTA offered
to facilitate the approval of the "Visit USA" office of the National
Tourism Association (NTA) that will be located in Shanghai and will
seek support from CNTA Shanghai.


8. (SBU) Mr. Liu Kezhi, DG of Marketing and International
Cooperation Dept, reported on the development of the Chinese tourism
industry. China is now the fourth largest destination in the world
and the first outbound market in Asia. In 2009, total tourism
revenues were RMB 1.26 trillion (USD 184 billion),up 9 percent; and
the volume of domestic tourism was estimated at 1.9 billion
person/trips, up 11 percent. Liu reported USD 39 billion in
currency exchange. China saw 47.5 million outbound person/trips in
2009, up 3.3 percent.


9. (SBU) Liu also explained that tourism was a key element in
overall development plans for rural areas. On December 1, 2009, the
State Council issued an Opinion on the acceleration of tourism
development. The Chinese government hopes tourism will become an
"economic pillar" and is actively encouraging tourism consumption.
At the end of December, the State council issued another Opinion
pushing forward construction efforts to develop Hainan into an
internationally recognized tourist destination. CNTA promised to
share an English translation of the Opinion with the U.S.
delegation.


10. (SBU) Liu cited Australia as a good model for tourism promotion.
The Australian Tourism Board organizes seminars for Chinese
travelers and holds an annual review meeting with CNTA. Tourism
Australia trains the staff of Chinese outbound tour operators,
creating an "Aussie specialist" with a good understanding of the
tourism resources available in the country.


11. (SBU) NTA President Lisa Simon said that the NTA had amended the
requirements in June 2009 for U.S. tour operators under the MOU to
address some of the problems the Chinese had previously raised
concerning the quality and safety of tours offered by NTA-approved
agencies. These new requirements on safety, insurance and accurate
representation can be found on the NTA website in "Rules of the
Road" under the MOU. She explained the NTA "Visit USA" office that
will be set up in Shanghai will help provide information about U.S.
travel and support to the Chinese travel agents that the CNTA has
long been requesting. Charles Reynolds, Visa officer at the U.S.
Embassy in Beijing reported that the United States issued 362,185
business and tourism visas in China in 2009, 8.6 percent more than
in 2008. On average, more than four out of five applications were
approved.


12. (SBU) Simon echoed the mutual sentiment of achievement in
promoting tourism, but also raised some concerns from the U.S.
perspective. Although the NTA updated its list of approved tour
operators on its website every six months, the corresponding list on
the CNTA site was an old one from 2008. NTA would like to update
its own list on their "Visit USA" website, but needed some basic
information on the Chinese travel agencies. Simon noted that price
sensitivity by Chinese agents and consumers was an important factor
in driving tour prices down. In answer to the question of American
companies not marketing adequately, she brought up the inability of
American firms to directly advertise as hampering that effort.
Simons also observed that Chinese travel agents do not always use
NTA approved partners in the U.S., and that these agents do exist
throughout the country, not just along the coasts. Finally, Simons
asked CNTA to reconsider their prohibition on the promotion of legal
gaming, since the legal gaming industry was suffering since they
could not conduct any promotions in China.


13. (SBU) In the question and answer portion of the meeting, CNTA
asked if a U.S. company hires a bus, which party has legal
responsibility; and what is the requirement for insurance for travel
agents? NTA answered that the U.S. Department of Transportation
(DOT) requires insurance for any motor vehicle, and that travel
agents are required to carry at least 1 million dollars in liability

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insurance. NTA inquired about rogue Chinese travel agents going
around NTA approved agencies. CNTA reported they would deal
severely with any offender among their members, and invited the U.S.
to report incidents to Mr. Liu since all Chinese agents were
required to use an NTA approved agency.


14. (SBU) DAS Secundy and VC Liu jointly declared the meeting a
success, and concluded by signing the Work Plan for 2010. The Work
Plan will include (1) mutual support of tourism export promotion;
(2) cooperation in tourism investment; (3) bilateral tourism
development support through the promotion of information exchange;
(4) local-level tourism cooperation through the "China-U.S. Tourism
Directors Summit;" and (5) enhanced communication between the CNTA
and the USDOC to ensure successful travel under the MOU. The next
working group meeting will be held in the United States.


15. (SBU) United States Delegation:
- Joel Secundy, DAS, Department of Commerce (DOC)
- Isabel Hill, Office of Tourism, DOC
- Sandra Guzman, Market Access and Compliance, DOC
- Gwen Lyle, Commercial Officer, Beijing FCS
- David Gossack, Principal Comm. Off., Shanghai FCS
- Charles Reynolds, Consular Officer, Embassy-Beijing
- Lisa Simon, President, National Tourism Assoc. (NTA)
- Matt Grayson, Government Relations, NTA


16. (SBU) Chinese Delegation:
- Mr. Zhu Shanzhong, Vice Chairman, CNTA
- Mr. Liu Kezhi, DG, Marketing and Intl. Coop. Dept., CNTA
- Mr. Long Wei, Div. Dir. of Travel Agency Mgmt., CNTA
- Ms. Tang Bin, Div. Dir. of Public Service, CNTA
- Ms. Wang Yanjie, Dep. Div. Dir., Intl. Coop. Dept., CNTA
- Ms. Zhang Li, Intl. Coop. Dept., CNTA
- Ms. Zhu Ning, Intl. Coop. Dept., CNTA
- Mr. Chen Chen, Secretary to Vice Chairman Zhu

HUNTSMAN