Visitation to the US got off to a strong start in 2012

Newly released figures from the Office of Travel Tourism Industries (OTTI) have underlined the importance of China to inbound tourism growth in the US as visitor numbers to the country in January 2012 rose seven per cent to 4.5 million.

According to the OTTI, traveler numbers from China grew a whopping 60 per cent in January (when compared to the year before), dwarfing the next highest increases from Brazil (18 per cent), Canada, Germany (both 9 per cent) and Australia (8 per cent).

Notably, visitor numbers from the UK and France declined by four per cent.

With January registering the tenth straight month of increases in total visits to the US, the top inbound markets were Canada and Mexico, whose visitor numbers rose four per cent.

Meanwhile, the US Department of Commerce has revealed that a record US$10.1 billion was spent by international visitors on tourism-related activities in February, a 13 per cent rise on 2011 figures.

Year to date, US travel and tourism exports have grown more than 11 per cent in 2012.

“We have seen long-term growth in both arrivals and spending and hope to continue that trend with the focus provided by the Obama Administration on this growing sector,” Commerce Under Secretary for International Trade Francisco Sanchez said.

“That is why we are making it even easier to visit America’s most amazing places and working hard to tell folks about what an amazing place America is whether you travel five or 5,000 miles to get here.”

The good news for tourism comes just days before the US Travel Association kicks off its annual International Pow Wow convention, the largest event for generating travel to the US.

By BOB DAVIS

ERLIAN, China—Lisa Guetzkow, a 25-year-old American, is crossing the dusty border from China to Mongolia crammed into the front seat of an ancient Russian jeep that has a scarf for an inside door handle. She’s making a visa run. If it works out, she’ll be able to stay another three months in Beijing, until she has to dart across the Chinese border again.

Bob Davis/The Wall Street Journal

Lisa Guetzkow waits in a Mongolian border town for a ride back into China.

Beijing and other Chinese cities are magnets for young expats in the way that Paris was after World War I and Prague was after the Cold War. The dollar is still strong, jobs are plentiful and the bar scene vibrant. “It’s not hard to teach English in China,” says James Schiffer, a 25-year-old Oregonian, who returned home last year after three years in China. “If you have a white face and a pulse, you can get a job.”

Many of the 20-somethings either have tourist or business-meeting visas that are good for a year, but require holders to leave the country every two or three months to be renewed—a requirement aimed at preventing visitors from settling down and taking jobs without the proper work visa. To get around that, young people make dashes to the border before their visas are set to expire, sometimes spending just enough time to get a foreign stamp in their passport before heading back to China.

Russian and Eastern European models have especially tough times on the border, say visa specialists in China, because the guards suspect they may be prostitutes. The models generally have tourist visas and can’t admit they are working, so many say they want to get back to China to spend time with long-term boyfriends.

Andy Parker, a British male model in Asia, says some of his female colleagues dress to the nines to impress the border guards that they have high-powered and well-connected Chinese boyfriends. But a Polish model in Beijing, who asked that her name not be used, says her agency gives the opposite advice: Dress down in jeans, plain tops and no makeup. “Look like a student,” she says.

One 29-year-old Californian who teaches social studies in southwestern China has taken 10-hour bus rides to the Laotian border and eight-hour trips to Vietnam for visa runs. Laid-back Laos is a snap, he says, but re-entering China from Vietnam can be a hassle.

Lisa Guetzkow

Some visa runners have had their China guidebooks confiscated if the books have maps that mark Taiwan as a separate country rather than a province of China, he says. And during one crossing, a border guard grilled him about what college he attended. “Harvard,” he answered. Is Harvard’s president male or female, he says the guard demanded to know.

The teacher says he guessed male but the border guard knew better. Drew Faust had become Harvard’s first female president. He explained he was thinking of the years he went to college, an answer that earned him entry back into China.

Some try to avoid the hassle of a border run altogether by turning to visa agents who claim they have enough clout with local governments to get visa renewals or fresh visas for fees ranging from about $450 to $2,000.

One visa agent, who goes by the name of Peter, requires customers to check into a hotel with other expats and hand over their passports and other paperwork. Later he walks his customers through a local police station that handles visas and gets them the necessary stamps.

Mr. Schiffer, the Oregon native, was a customer of Peter’s when he sought a new visa. “Overall the entire experience reminded me of weed runs I would go on with friends back in the States,” he says.

Reached by phone, Peter wouldn’t give his last name. He also wouldn’t explain his techniques. “That’s the whole point of my business,” he said. “How can I tell you about that?”

China’s Public Security Bureau, which handles visas, didn’t comment on specific questions about visa runs, except to cite Chinese regulations.

Ms. Guetzkow, the 25-year-old American, chose Mongolia for her visa run because it was cheap and seemed romantic. She passed up the cheapest way to get to the border—a $40 overnight bus where 40 passengers sleep in submarine-tight quarters—in favor of a $55 morning flight. Her destination was Erlian, a Chinese border city, whose main road is decorated with green statues of dinosaurs in honor of dinosaur bones found nearby.

The border scene is chaotic. Drivers rev the motors of their beat-up vehicles, shouting in Chinese and Mongol for passengers to board for a 300-yard drive to the Chinese immigration center and then another few miles to the Mongolian equivalent. Travel blogs warn some drivers will stop halfway between the two buildings and extort expats to pay twice the usual 50 yuan fee ($8) to continue, but Ms. Guetzkow made it to the other side with no problem, happy she now had a Mongolian stamp in her passport.

She had hoped to ride a horse in the Mongolian city of Zamiin-Uud on the border. But the achingly poor town doesn’t appear to have a blade of grass—the dust next to the sidewalks is four inches thick—let alone a horse, although a yak wanders by. She settles for a photo of herself in front of a tree whose limbs are wrapped in blue scarves.

When it is time for the return trip to Erlian, she manages to convince a jeep driver to take her and a traveling companion for 70 yuan, instead of the usual 100. But at the Mongolian checkpoint, the driver has second thoughts, pulls a U-turn and heads back to Zamiin-Uud. “180 yuan,” he demands.

No deal, says Ms. Guetzkow, who then spends an hour looking for someone to take her and her companion for the usual 100. Word had spread instantly that 180 was the new normal.

Eventually, a female taxi driver agrees to ferry the pair for the usual price, and Ms. Guetzkow gets the stamp in her visa that entitles her to spend another three months in China. For her next visa run, she’s going upscale. She plans to go to South Korea and spend time on a resort island there.

—Yang Jie contributed to this article.

Write to Bob Davis at bob.davis@wsj.com

China’s slowing economy isn’t deterring CEOs of the world’s biggest international hotel chains, who describe the Chinese market as the “most important in the world” and are keeping their aggressive expansion plans for the country intact.

Christopher Nassetta, CEO of Hilton worldwide, told CNBC that the company plans to more than quadruple the number of hotels in China over the next few years, after growing that number to 30 from just 5, four years ago.

“From an operating point of view, China continues to show great strength,” Nassetta said in an interview with CNBC Asia’s “Squawk Box” Wednesday. “So our expectation is: we will easily meet our goal of having another hundred hotels open and operating over the next few years.”

The CEO of rival Starwood Hotels and Resorts Worldwide, which run high-end brands including the Sheraton, W and St Regis, described China as “the world’s first 5-trillion dollar economy” that is “sheepish about 8 percent growth.”

“We will soon have another 100 hotels under construction and the reality is, because of the low cost in China to build hotels, they can be profitable at relatively lower rates of occupancy than almost anywhere else in the world,” Frits Van Paasschen told CNBC Asia’s “Squawk Box” Wednesday.

Starwood and competitors such as Marriott International and IHG, as well as domestic Chinese companies, are currently building more than 120,000 rooms in China, according to statistics from STR Global, a U.S-based tourism research firm, to cash in on the country’s growing travel sector.

China is forecast to become the world’s second largest travel and tourism economy after the United States by 2015, says the World Travel Tourism Council. But a slowdown in the world’s number two economy, which expanded 8.1 percent at the slowest pace in nearly three years, has concerned some industry watchers already worried about oversupply.

Zhao Huanyan, a tourism analyst with the Shanghai Academy of Social Sciences, told Chinese press late last year that oversupply of hotel rooms in China is inevitable. “If we compare the average occupancy rate and room rate of the hotels in Beijing and Shanghai with those in Hong Kong and New York, we can see a sign of oversupply on the Chinese mainland,” he was cited as saying.

According to a report by the China Tourism Academy (CTA) in January 2012, foreign visitor arrivals are forecast to grow by only 1.2 percent year-on-year this year, which could impact hotel occupancy.

But Van Paasschen argues that developer demand remains strong and investors should look beyond these figures. “If there’s a short-term correction, that doesn’t concern me very much,” he said.

Growth in Resorts, Value-Minded Segments

Starwood, which is opening a Westin and Sheraton ski resort in Changbaishan in China in August, sees big growth in the resorts segment.

“Resort space in Asia is still relatively short supply. If you look at the sheer number of people, the sheer amount of GDP relative to great locations to go to, the long term play in Asia is resort locations, [with] Hainan at the top of that list,” Van Paasschen said, referring to the southern Chinese province.

Meanwhile, Hilton, which has 30 hotels in China including a Waldorf-Astoria property in Shanghai, is expanding its focus beyond luxury travelers. The hotel chain says it will build more hotels under its Double Tree brand, for travelers in between the so-called ‘economy’ and ‘upscale’ segments.

“None of the international companies have done a particularly good job at exploiting that opportunity and the Chinese companies themselves have stayed at the lower price point,” Nassetta said. “We think there’s a huge opportunity between the two spaces and over the next 3, 4 years we are going to be going to pursuing those opportunities.”

Ben Wilmot, Fiona Carruthers and Matthew Cranston

Lindeman Island is set to sell for about $12 million to Chinese investors who hope to tap the China ­tourism boom after previous owner Club Med of France shut the resort due to poor visitor numbers.

Tourism industry experts hope Lindeman’s reopening will create more than 300 jobs and boost local airport traffic by up to 15 per cent.

Agents CBRE Hotels and Club Med are thought to be close to ­sealing the deal to deliver Chinese investors their first Australian island, after ventures to buy Sheraton Mirage at Port Douglas for $35 million and Whisper Bay Resort at Airlie Beach for $56 million in the past two years.

Federal Tourism ­Minister Martin Ferguson gave a cautious nod yesterday and Premier Campbell Newman said “we’re open for business in tourism and the welcome mat is out”.

But Queenslander and federal MP Bob Katter said: “Well, you may as well turn over the whole country to them. I am not averse to encouraging Chinese tourism, but I can’t see how Australians will get a single cent out of this. Will there be more Australian jobs? Probably not. This is just another nail in the coffin. None of these countries will allow you to buy property in their countries. People have had a gutful of this.”

But Keith De Lacy – Queensland businessman, director of the Reef Casino Trust and a former chairman of Macarthur Coal and former Queensland treasurer – said the tourism industry was in the doldrums “and people see its salvation in the Chinese. China represents the largest possible market.

“If the company that purchases the island starts to market the Great Barrier Reef and Queensland, then it’s all positive and no negative. A lot of people were negative about the Japanese investing in resorts during the 1980s, but the Japanese didn’t take them back to Japan.”

Mr De Lacy has also represented COFCO, a Chinese company buying agriculture in Australia, in the past.

Chinese companies have been building stakes in Club Med globally.

Hong Kong-listed Fosun International, one of China’s largest investment companies, took a stake in Club Med in 2010. Club Med then set up the Yabuli Ski Resort in China and is planning another leisure resort in Guilin, China, this year.

Club Med plans to have five resorts in China by 2015, making China its second-largest market after France.

High-profile real estate agent Ken Jacobs, who sold Lindeman to Club Med in 1990, recalled that Queensland’s tourism and property markets were depressed then as well.

Lindeman was hard hit by the pilot strike but Club Med’s purchase sparked hopes of a revival, which tourism players now hope Chinese investors will generate.

The Australian Financial Review understands terms have been agreed on Lindeman Island and contracts are expected to be exchanged next week with an offshore party.

Club Med has said it closed the resort because it did not match the group’s focus on four- and five-star.

The general manager of Club Med Australia, Quentin Briard, said yesterday “we are under discussion with potential investors as a result of a good sale process led by CBRE”.

Queensland has borne the brunt of the tourism downturn as the strong Australian dollar keeps international visitors at bay and Australian holidaymakers increasingly opt for cheap deals overseas.

International arrivals in Queensland fell from 2 million in 2008 to 1.8 million last year, according to the International Visitor Survey. However, the number of Chinese arrivals in the Sunshine State held up strongly, rising from 132,000 in 2008 to 203,000 last year, with most of them heading to the Gold Coast.

Seven Queensland island resorts have closed over the past three years.

Experts warn that Queensland’s tourist industry needs to become more affordable and improve quality.

The shock closure of the rundown Great Keppel in 2008 triggered a string of closures at other island resorts, including Couran Cove near the Gold Coast followed by Club Med’s Lindeman Island. Mr Ferguson told the Financial Review that “Australia ­welcomes foreign investment subject to the appropriate scrutiny by the ­Foreign Investment Review Board”.

“Investment in the tourism industry is positive news as new and improved product offering are vital to ensuring Australia remains competitive as a tourist destination.”

The proposed purchase comes as Mr Ferguson prepares to launch an Australian tourism investment prospectus in Melbourne in the first week of May. The glossy sales document prepared by Austrade and Tourism Australia will help Asian and other foreign investors better ­target shovel-ready sites for tourism development with government approval.

The Queensland Premier spent the day in Cairns, announcing that the inaugural “DestinationQ” forum would be held there in June because the Cairns local tourism industry was most in need of a boost.

Part of Mr Newman’s election pitch was a promise to host tourism industry forums to reinvigorate the sector.

The chief executive of the Tourism and Transport Forum, John Lee, hailed the bid for Lindeman as a smart move by the Chinese, given the Whitsundays were home to some of the most beautiful flora, fauna and marine life in the world.

“The Whitsundays was where Oprah Winfrey touched down [when she visited Australia in 2010]. You have luxury accommodation and the best marine national parks in the world,” he said.

“The last 18 months has been tough on Queensland. It’s withstood cyclones, and Hayman Island had to close for a couple of months due to cyclone damage. This is an important psychological signal to the industry that the regions are rebounding.”

The Japanese might have spent the past 20 years exiting the Australian tourism property market but the Chinese are now keen to buy a slice of Aussie paradise. The Lindeman Island Resort is being marketed as a 584-hectare leasehold 40 minutes by air from the new Cairns international airport, or a short boat trip from Hamilton Island airport.

Chinese tourists were worth $3.8 billion to the industry last year, with more than 540,000 visiting, a 20 per cent rise on 2010 figures. Tourism Australia believes this market will be worth $9 billion by 2020.

But much has been written about the frustration of Chinese visitors that so little information in Australia – from tourist signs to menus – is written in Chinese.

If the deal goes through, the Chinese will be in good company in terms of snapping up distressed Queensland inventory. US giant Delaware North picked up Lizard Island Resort, Heron Island Resort and Wilson Island Resort from GPT Group in 2009.

Closer to home, mining magnates Clive Palmer and Peter Bond, and technology guru Chris Morris have also invested.

A recent CBRE Hotels review points to signs of a “fledgling” ­recovery in the Queensland tourism market, with international visitor numbers rising 1 per cent in the first half of 2011.

“I think any fresh money that can kickstart the tourism industry is most welcome,” Linc Energy founder and managing director Mr Bond told the Financial Review yesterday.