Tue, Oct 11, 2016 - Page 8 News List

Economics of Chinese tour groups

By Tsai Hung-jeng 蔡宏政

Article 3 states that agencies that are allowed to organize tour groups to Taiwan are to be appointed by the Chinese National Tourism Administration in conjunction with related departments.

Taiwan-bound tour operators are picked from among travel agencies that have already been designated to operate overseas tours, and that have been approved and announced as such by the Association for Tourism Exchange Across the Taiwan Straits.

The law further states that, apart from this reserve of designated travel agencies, no other unit or individual may organize tours to Taiwan.

This means that the business of Taiwan-bound tourism is the most forbidden of forbidden zones in China and neither foreign-invested nor Taiwan-invested agencies can engage in it. These conditions have formed a franchise in which a small number of travel agencies designated by Chinese authorities exercise an oligopoly over the business of Taiwan-bound tourism.

There are three reasons why the Chinese government finds it necessary to maintain such an oligopoly.

The first is a political one. The restrictive system makes it easy for the Chinese government to decide which nations can be visited by Chinese tourists, when and how to dispatch those tourists and how many people can go. The government can also decide when and how to withdraw these “tourism benefits” as a way of putting pressure on the nation in question to attain its political goals.

The second reason is an economic one. The oligopoly allows a minority of tour group operators to control the distribution of outgoing tour groups. This creates a buyers’ market in which the operators can hold down the prices asked by the agencies that handle the tour groups in destination nations. They may even designate specific travel agencies, hotels, tour bus operators and shopping venues, forming an all-in-one operation that provides the maximum return of profit to the Chinese tour organizer.

The third reason is a matter of social control. The “all-in-one” mode of operation is the best way of keeping Chinese who go abroad on a fixed itinerary. It makes it easier to manage the participants and avoid the need to come into contact with society in their destination.

However, this kind of arrangement leads to a business model in which Taiwanese travel agencies engage in price-cutting by accepting low group fees or no group fees at all. They supplement their profits by taking commissions from shopping venues.

Phoenix Tours chairman Jimmy Chang (張金明) was quoted in issue 1369 of The Journalist magazine as saying that each Chinese tourist pays about US$60 to go on a Taiwan tour, but when the Chinese tour group organizers’ share is deducted, the amount that a Taiwanese operator receives might be just US$40, and some agencies even accept business for just US$15 to US$20 per head.

Because they do most of their shopping at only a few venues, Chinese tourists’ consumption cannot benefit ordinary shopkeepers who conduct business around tourist spots. Instead, the presence of Chinese tourists often necessitates more cleaning and trash collection while making traffic conditions worse.

As the number of Chinese tourists rises, their presence gradually shrinks the local economic benefits from tourism in Taiwan. It is precisely for this reason that Thailand has been cracking down on these so-called “zero-dollar” group tours.

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