Economic significance of tourism to developing countries

It is very difficult to measure the scale of tourism activity within an economy and hence itscontribution to GDP. This is because tourism is not traditionally measured in national accounts.To address this problem, WTTC have developed ‘satellite accounts’ (Box 3). However,construction of satellite accounts requires detailed data – which are unlikely to be robust in poorcountries. The accounts therefore are useful for providing indicative figures, for example tocompare across different countries or to highlight countries with major tourism sectors. But togain further information on the significance of tourism activity within any one country, local dataand local knowledge, for example discussions with the Ministries of Finance, Tourism, andStatistics are necessary.Table 6 illustrates the high contribution that tourism, thus measured, makes to the GDP in anumber of developing countries. Interestingly, this table shows a completely different set ofcountries from those highlighted in Section 3 as significant destinations on the basis of visitornumbers. The vast majority of these countries (except for Belize, Tunisia and Jordan) are smallisland states with a very well developed tourism industry and relatively few other economicalternatives. The Caribbean as a region is particularly strongly represented.Box 3: A caution on dataThis section is based on WTTC data drawn from satellite accounts which are used to produce twodifferent aggregates: those for the travel and tourism industry and those for the travel and tourismeconomy (see WTTC 2003).• The ‘Travel and Tourism Industry’ captures the explicitly defined production side ‘industry’equivalent, direct impact only, for comparison with all other industries;• The ‘Travel and Tourism Economy’ captures the broader ‘economy-wide’ impact, direct andindirect, of travel and tourism.The data used in this section refer to the tourism-economy as these provide a more comprehensiveaccount and obviously a much larger total figure. This seems to be important in relation to PPT asmuch emphasis is placed on linkages with suppliers such as agricultural suppliers etc.The WTTC also publishes ‘league tables’, which contain estimated data for most countries. Theseleague tables are useful in identifying the relative importance of tourism at the national level.However, the complexity of the process by which the figures are calculated and the nature of thestatistics upon which the calculations are based can diminish the impact of the data in analysis anddebate.19Table 6: Developing countries ranked according to the contribution that the tourism economy makesto the GDP in 1999 (all figures are %)8Contribution oftourism to GDP1990Contribution oftourism to GDP1999Growth inGDP 1990-1999% of ExportEarning in 19991 Maldives 72.8 87.7 20.5 74.32 Anguilla 82.0 71.1 -13.3 50.93 Saint Lucia 52.0 59.2 13.7 65.64 Seychelles 54.0 49.2 -8.9 41.25 Vanuatu 32.3 41.2 27.5 47.56 Barbados 41.0 41.2 0.4 50.47 St Vincentand theGrenadines 34.4 33.1 -3.845.18 Jamaica 28.3 31.5 11.1 43.79 Saint Kittsand Nevis 48.8 30.9 -36.850.210 OtherOceania 22.8 29.3 28.847.011 Fiji 22.4 27.7 23.7 35.312 Grenada 27.0 26.4 -2.4 40.813 Belize 21.1 26.2 24.2 32.214 Mauritius 22.6 24.4 8.1 31.815 Dominica 17.5 24.2 38.3 36.816 DominicanRepublic 20.2 23.6 16.833.917 Jordan 27.2 22.6 -17.0 35.218 Kiribati 17.9 21.0 17.1 15.419 Bahrain 6.3 16.9 169.8 16.620 Tunisia 16.4 16.1 -2.0% 22.9Source: WTTC 2003Note: Antigua and Barbuda has been taken out of the data-set because of errors in the data supplied by the WTTC, it is however expectedthat the country’s position will be among the top 5 countries with the highest contribution of tourism to the GDP.Tourism is important for many more developing countries than any other export. Its is in the topfive exports for more than 80 per cent of countries, and the principal export for a third ofdeveloping countries (WTO 1998). Table 6 also shows that many small developing countries arehighly dependent on tourism, to an extent comparable with the dependence on single primarycommodities long recognised as a risk to development. Five are dependent on tourism for morethan half their exports and 18 for more than 20 per cent. All the 25 countries with the highestshare of tourism in GNP are small islands. Some also have another commodity on which they arehighly dependent: St Lucia and St Vincent, Bananas; Jamaica, bauxite; St Kitts, Belize andMauritius, sugar; Kiribati, copra.Is dependence on tourism as serious a problem as dependence on a single commodity? In terms ofvulnerability to a sectoral shock, whether domestic (e.g. a hurricane) or international (e.g.security), clearly it is. But tourism has a high income elasticity and it is a many-sided product.These facts mean that it less vulnerable to the poor demand prospects which make commoditydependence so undesirable. As we will discuss below, for small countries Brau et. al. (2003) haveshown that tourism dependence leads to higher growth, in sharp contrast to commoditydependence. While the effects will be smaller for larger developing countries, it is likely to be inthe same direction.

Developing countries as major international destinations

Five developing countries6 were in the list of twenty major tourist destinations according tointernational visitor arrivals statistics in 2000. The volume of arrivals to the top destination in thedeveloping world – China - was only just over 40% of the volume to the world’s leading tourismdestination - France. That developing countries feature within the list of the top 20 destinations isa relatively recent phenomenon. Only 15 years earlier China, for example, received only 1.3million arrivals due to its restrictive travel policy. More established destinations like Mexico haveseen very similar growth rates when compared to France, i.e. a doubling of arrivals between 1985and 2000. Compared to other developing country exports, this gives them exceptionalprominence. While developing countries receive 42% of tourism spending (Table A2) they onlysupply 25% of traditional primary commodities (Page and, Hewitt, 2001). Developing countrieshave a surplus on tourism trade (they are net exporters).Table 2: Top 20 destinations in terms of international arrivals in 2000Position Country Arrivals (millions)1 France 75.52 United States 50.93 Spain 47.94 Italy 41.25 China 31.26 United Kingdom 25.27 RussianFederation21.28 Mexico 20.69 Canada 29.710 Germany 19.011 Austria 18.012 Poland 17.413 Hungary 15.614 Hong Kong(China)13.114 Greece 13.116 Portugal 12.017 Switzerland 11.418 Malaysia 10.219 Netherlands 10.220 Turkey 9.620 Thailand 9.6Source: WTO/OMT 2001For purposes of comparison, Table 3 provides details on the 20 largest developing countrydestinations and illustrates the significantly lower volumes of international tourists that most ofthese countries receive compared to the totals in Table 2. Table 4 classifies these by region. OnlyChina, Mexico and Malaysia attracted over 10 million arrivals in 2000 reaching levels seen insome of the newer European destinations such as Poland, Hungary and the Czech Republic. SouthAfrica and Tunisia, which are relatively small destinations in a global context, are major playersin an African context.6 Developing countries for the purpose of data collection and display are those included in the OECD DAC list of aid recipients.Russia is also a sizeable tourism destination, and while not included in this definition, is the tenth country in terms of the numberof people living below the international poverty line.16Table 3: Significant developing country destinations in terms of international arrivals in 2000Country Arrivals (millions)1 China 31.22 Mexico 20.63 Malaysia 10.24 Turkey 9.65 Thailand 9.66 South Africa 6.17 Croatia 5.88 Brazil 5.39 Egypt 5.110 Indonesia 5.011 Tunisia 5.112 Morocco 4.113 Argentina 3.014 Dominican Republic 3.015 India 2.616 Philippines 2.217 Vietnam 2.118 Bahrain 2.019 Uruguay 2.020 Zimbabwe 1.9Source: WTO/OMT 2001Table 4: Regional Variations in international arrivals to developing countries, 2000Region Countries withover 10m arrivalsCountries with 5mto 10m arrivalsCountries with 1m to5m arrivalsAmericas MexicoBrazil Dominican Republic,Cuba, Cost Rica, Jamaica,Argentina, Chile, Peru,UruguayEast Asia /PacificChina Malaysia Thailand, Indonesia Vietnam, PhilippinesAfrica South Africa,Tunisia, EgyptMorocco, ZimbabweMiddle East Bahrain, JordanSouth Asia India, IranEurope RussianFederation7Turkey, CroatiaSource: WTO/OMT 2001Table 5 shows that those that have the highest number of international visitors do not necessarilyearn the highest receipts although there is a close correlation between the two. Cuba, Syria andJamaica are higher on the list; Uruguay, Bahrain and Zimbabwe are lower, perhaps because theyare destinations for short stays.7 Included here for the sake of comparison.17Table 5: Significant developing country destinations by tourism receipts, 1999Position Country Tourismreceipts(US$Million)Receipts perint’l visitor(US$)1 China 14,098 5212 Mexico 7,223 3793 Thailand 6,695 7744 Turkey 5,203 7555 Indonesia 4,710 9966 Brazil 3,994 7827 Egypt 3,903 8698 Malaysia 3,540 4469 India 3,036 1,22310 Argentina 2,812 97011 Philippines 2,534 1,16712 South Africa 2,526 41913 DominicanRepublic2,524 95314 Croatia 2,493 65515 Morocco 1,880 49316 Cuba 1,714 1,09817 Tunisia 1,560 32318 Syrian ArabRepublic1,360 98119 Jamaica 1,279 1,02520 Costa Rica 1,002 971

Advantages and disadvantages of tourism as an engine for propoor

Tourism is not a panacea for economic development. In any context decisions about whether ornot tourism - domestic or international - presents viable opportunities for local economicdevelopment need to be made locally in the context of the other opportunities which exist for propoordevelopment. As with other industrial sectors, economic growth as a result of tourismdevelopment does not necessarily result in poverty reduction. However, tourism does have someadvantages over other sectors for delivering pro-poor growth (Deloitte and Touche, IIED and ODI1999, Ashley, Roe and Goodwin 200l, WTO/OMT 2002, Page 1999):• Tourism delivers consumers to the product rather than the other way round. This opens uphuge opportunities for local access to markets for other goods and services. Developmentstrategies can enhance potential links to local enterprises and poor producers.• Tourism does not face tariff barriers, although taxes on air travel can have a similar effect.• Tourism has considerable potential for linkage with other economic sectors – particularlyagriculture and fisheries. Realising these linkages will increase the proportion of tourismrevenue retained in the host country.• There is a possibility of other types of linkages, for example demand for tourism may addsufficiently to another sector’s demand for the combination to provide a basis forintroducing local provision of goods or services, e.g. transport.• It may create initial demand for a good or service that can then itself become a growthsector. In furniture, both Jamaica and Kenya provide examples where furniture firmswhose first major market was hotels have developed to provide other consumers.• Tourism provides opportunities for off-farm diversification. Tourists are often attracted toremote areas with few other development options because of their high cultural, wildlifeand landscape values.• Tourism provides relatively labour-intensive opportunities. It is more intensive thanmanufacturing and non-agricultural production, although less labour-intensive thanagriculture. Its relation to the economy as a whole therefore depends on the relativeweights of agriculture and manufacturing: this suggests that it is more likely to be amongthe most labour intensive sectors of the economy in more developed countries (see TableA5).• Tourism employs a relatively high proportion of women and can contribute to genderequality. This is, however, less true in developing countries where there is higher maleunemployment than in developed countries.• Tourism can provide poor countries with a significant export opportunity where few otherindustries are viable. The large number of countries for which tourism receipts areimportant is evidence that it is a much less demanding sector in terms of initial conditionsthan many other commodities available to developing countries. In particular it is morewidespread than most agricultural goods, which are its superior in labour intensity. Itappears to be more like manufactures, where comparative advantage can be createdthrough a combination of identifying a possible product and creating a specialiseddemand.• Tourism products can be built on natural resources and culture, which are assets that someof the poor have.13• The infrastructure associated with tourism development (roads, electricity,communications, piped water) can provide essential services for rural communities whichwould otherwise be excluded from general infrastructure provision.• It appears to have relatively few market distortions (either as barriers to entry or tradepolicy rents). It is particularly sensitive to marketing skills, and also to public sector action(or inaction).• It has a high income elasticity, and therefore offers a relatively rapidly growing market.Tourism may be expected to perform ‘better’ than traditional commodities, but notnecessarily better than newer exports such as manufactured products.• It can take different forms, using different inputs, and is therefore available to a widerange of countries (and regions within a country).At the same time, tourism operates in a market economy and it is subject to international marketforces. New destinations emerge and others decline because they are undercut on price or becomeunfashionable. Countries dependent upon undifferentiated products like the traditional beach, sun,sand and sea holiday are particularly vulnerable. It is relatively easy for tour operators to respondto new opportunities and to switch operations when new destinations come in at a morecompetitive price.Political instability and security concerns (both domestic and international) also have an impacton tourism. Countries with significant domestic and regional tourism industries tend to suffer lessbecause these are not affected by declining numbers of air travellers in the face of terrorism fearsbut internal security issues can also pose a threat. Experience suggests that tourism numbersrapidly recover from terrorism and other events, although not uniformly so. Seasonality is also anotable feature of the tourism industry. Whether tourism is seasonal and whether the seasonalityis compatible with agricultural work in particular are likely to affect its pro-poor potential. Risk isreduced if countries (as well as individual households) are not overly dependent on any oneeconomic sector and in the case of tourism, which is vulnerable to changes in consumerpreferences, undercutting from new competitors and recession in originating markets, on any onemarket. The constraints described above are not unique to tourism but affect many otherindustries. Section 4 compares dependence on tourism to dependence on other exports.There are also myths surrounding tourism and the view that tourism is not a worthwhile or‘serious’ local economic development strategy is widely held. To a large extent this view is aresult of a failure to recognise the heterogeneity of the industry, but there is also a view thatservices, and tourism in particular, are not ‘serious’ development drivers, like agriculture andmanufacturing. It is therefore often neglected and subject to policies and priorities designed forother sectors. It is rarely singled out as strategically important, because of either its potentialeffects as a pole of development for other industries, or its poverty effects. Therefore, when itcomes into potential conflict with the interests of industries that are regarded as national prioritiesit is tourism whose interests come second. But this ‘neglect’ is in the context of a much greateracceptance that government has a direct interest in the outcome than would be true for most otherpredominantly private industries. Most countries have a tourism ministry, even if it is ‘tourismand...’, not just tourism; most other sectors do not. This puts tourism in an odd, intermediateposition; the government has an interest, but no clear perception of what that interest should be.In contrast to the view that linkages are an important advantage, there is a widely held view thattourism’s effects are dissipated by ‘leakages’. As Christie and Crompton (2001) argue leakagesare calculated for the tourism industry but less frequently for other sectors. They are used to referto the amount of tourism revenue that accrues outside of the host country – for example throughpayments to foreign-owned hotel chains, imports of food and other goods, or foreign airlines.Unusually high levels of leakage are often cited as one of the major disadvantages of tourism asan economic development sector – for example UNEP (undated) notes levels as high as 70 percent in Thailand and 80 per cent in the Caribbean. Christie and Crompton (2001) however quote14work by Philip English ‘The evidence also suggests that the net foreign exchange earnings fromtourism are significant, ranging from at least 50% of gross expenditures within the country to asmuch as 90% in the most advanced developing countries. Recent preliminary data suggest thatleakage is currently of the order of 23-25% in Kenya.It is clear, however, that the amount of leakage will depend greatly on the form of tourism and thenature of the economy and no standard figure can sensibly be applied across the globe. In smallcountries and islands (for example Mauritius), a share of spending goes on imports, but that isequally true of other industries in small countries and islands. In larger and more developedcountries (for example South Africa and Jamaica), the shares are much smaller. The mostimportant point about ‘leakage’ is that it can be used to identify opportunities to create economiclinkages within the host country - some of which could have the potential to benefit poorproducers.Other criticisms of tourism and the answers include (WTO/OMT 2002, 34-35):• Foreign private interests drive tourism, so it is difficult to maximise local economicbenefit: There is no evidence that levels of foreign ownership are higher than forcomparable sectors. It is clear that many small enterprises and individual traders sustainthemselves around hotels and other tourism facilities and that these SMMEs are notforeign owned. There is often confusion about levels of foreign ownership; localownership is often masked by franchise agreements and management contracts.• Tourism can impose substantial non-economic costs on the poor through loss of accessto resources (particularly beaches), displacement from agricultural land and social andcultural disruption and exploitation: The losses can be substantial for the poor andminimising them is an important PPT approach. However, many forms of developmentbring with them disadvantages of this kind.• Tourism is vulnerable to changes in economic conditions in the originating markets,which cause major swings in the level of tourism in the destinations, and internationalvisitor arrivals are also vulnerable to civil unrest, crime, political instability and naturaldisaster in the destination: It is not clear that the volatility of export markets for tourismis significantly greater than for other commodities. The destination has some control overcivil unrest, crime and political instability.

Definitions, data sources and caveats

Tourism data are collected and analysed by organisations such as the World TourismOrganisation (WTO/OMT) and the World Travel and Tourism Council (WTTC), while crosssectoraldata on trade flows are collected by the United Nations Conference on Trade andDevelopment (UNCTAD) and Balance of Payments data are produced by the InternationalMonetary Fund (IMF). The most limited definition of tourist services is that of the World TradeOrganization (WTO), which includes only hotels and restaurants, travel agencies and guides.This definition, based on producing sectors, is designed to cover services provided internationallywhich may be regulated (and therefore which need to come under the General Agreement onTrade in Services - GATS) and which are not included in other categories. While these are amajor component of tourism, and for some purposes the question of what is regulatedinternationally will be important, the WTO definition clearly excludes a great many activitieswhich are commonly purchased or used by ‘tourists’ and includes some (restaurant meals or hotelconference facilities for non-visitors, for example) which are not. An alternative approach is tomeasure the activities of particular types of people. This is the basis of the WTO/OMT definition,of spending by people away from their homes. It corresponds to the normal balance of paymentsdefinition, of spending by tourists, and to what is measured by most national surveys of tourists.National sources give more detailed data according to their different specialisations. For somepurposes, other types of data (regional data, information about particular activities or data fromtypes of supplier) can supplement these. The international and macro-economic data allow us tocompare countries and to compare tourism to other exports or other sectors. The more specificdata help us to understand the details of its impact. The international tourism data are built upfrom information on movements of people and some country data on their spending. Internationalbalance of payments data, although some use the same surveys, are based on what is spent, notwho spends it. Since data on services tend to be less accurate than those on trade in goods (whichBox 1: The growing significance of tourism to developing countries• ‘Since the 1950s developing countries have received increasing numbers of international tourists,mainly from developed countries. International tourist arrivals have grown significantly faster indeveloping countries than they have in the EU or OECD countries. Developing countries had 292.6million international arrivals in 2000, an increase since 1990 of nearly 95%. The subgroup of LeastDeveloped Countries (LDCs) had 5.1 million international arrivals in 2000. They achieved anincrease of nearly 75% in the decade. This performance by developing countries compares veryfavourably with the growth of tourism to countries of the OECD and the EU, which achieved around40% growth.’ See Appendix, Table A1.• ‘Over the last ten years there has been a higher rate of growth in the absolute value of tourismexpenditure as recorded in the national accounts in developing countries than in developed countries.The absolute earnings of developing countries grew by 133% between 1990 and 2000 and in theLDCs by 154%, this compares with 64% for OECD countries and 49% for EU countries’. SeeAppendix, Table A2.• ‘The developing countries and particularly the LDCs secured a larger increase in the income perinternational arrival between 1990 and 2000 than did the OECD or the EU. The LDCs secured anincrease of 45% between 1990 and 2000 and the developing countries nearly 20%, this compareswith 18% for OECD countries and 7.8% for the EU.’ See Appendix, Table A3.• ‘In developing countries the export value of tourism grew by 154% [between 1990 and 2000] secondonly to the growth in the manufacturing sector.’ See Appendix, Table A4.Source: WTO/OMT 2002:26-29. See Annex 1 for statistical background information.8can be ‘seen’ crossing the border), tourism and other services data in balance of paymentsinformation are often less carefully estimated and checked than in those sources that are dedicatedto tourism. Balance of payments data also, of course, exclude data on domestic tourists (as doother sources of tourism data – see Box 2), an increasingly important part of the sector in manydeveloping countries.The World Tourism Organisation defines tourism as ‘the activities of persons travelling to andstaying in places outside their usual environment for not more than one consecutive year forleisure, business and other purposes’. This broad definition of tourism is then broken down intosix categories1 according to the purpose of the trip:1. Leisure, recreation and holidays2. Visiting friends and relatives3. Business and professional4. Health treatment5. Religion/pilgrimages6. OtherThose that engage in tourism – i.e. ‘tourists’ – can also be divided into international tourists anddomestic tourists and into overnight tourists and same-day visitors. Official statistics tend to focuson ‘international visitors’. Each classification may be useful for looking at the effects of tourismor at expectations for how it will grow. Business travel, for example, will respond to some factorswhich are different from those driving leisure travel. Within the conventional understanding oftourism, as leisure trips of days or weeks, there are a range of possible activities, with potentiallydifferent impacts on the country by creating different demands on it. Other distinctions possibleare between ‘high quality’ (in the sense of high spending tourists) and low or between ‘highimpact’ (in either the sense of integrated into the non-tourism activities of the country or in aspecifically poverty or environmental sense) and low. Much of the basic infrastructure of all these(accommodation, food, and travel) are the same and therefore a high proportion of the effects, areconstant, but not all.If we are studying ‘spending or activity by tourists’, not just ‘production in the hotel and othertourism sectors’, we need to know absolute numbers of tourists, not just estimates of spending,partly because for many supplier industries information on numbers will be the only firminformation on which to base estimates of tourism’s impact, but also because concern about theenvironmental and other non-economic impact is often based on the quantity of tourists, not thevalue of services. We also need to know from which countries they come, because surveys showthat different nationalities use different services with different impacts.The WTO/OMT has done a great deal of work on the refinement of the technical standards usedto collect and report the data. However, not all countries are members of the WTO/OMT and thereliability of the data varies from country to country. The most basic statistic is internationalarrivals. But some countries do not report international arrivals figures and may have no effectivemechanism in place for collecting them. Where the figures do exist, they have a number oflimitations in assessing the potential significance of tourism for pro-poor growth:• By definition these do not reflect the strength and significance of domestic tourism • National data have limited utility in assessing the importance of tourism in differentlocalities within a country. At the local level there is no standard mechanism available forthe collection of data that can inform decision making – hotel occupancy figures aresometimes used as a proxy indicator but are commercially sensitive, time-consuming tocollect and under reporting can have tax advantages for accommodation owners.• Visitor arrival figures focus on volume rather than value. It is the amount of time eachtourist spends in any location and the amount of money he or she spends onaccommodation, transport and other goods and services as well as the overall volume oftourists that determines the economic impact that will be felt. Even where figures onaverage daily spend and in-country tourism expenditure are calculated however, they donot generally provide any information about the potential for pro-poor tourism unless thisis specifically analysed (e.g. by focusing on expenditure on goods that are, or could be,produced locally).• Figures on visitor numbers often say little about the potential of the industry for pro-poordevelopment. In West Humla, Nepal, for example very small numbers of tourists have asignificant impact on local livelihoods.2• The form of tourism and the extent of access to tourists by local people as well as thevolume of tourists define opportunities for pro-poor tourism. If tourists arrive in adestination or at an attraction in coaches in the evening, drive straight to the hotel and eatdinner without venturing out, and in the morning pack and depart by coach to visit acultural monument before driving on to their next overnight stop, there are very fewopportunities for poor producers to sell to tourists – what ever volumes they arrive in.Beyond visitor arrival statistics, a Tourism Satellite Accounting (TSA)3 system has been developedby the World Tourism Organization and the World Travel and Tourism Council4 to estimate theeconomic value of tourism at the national level. Satellite accounts involve the ‘rearrangement ofexisting information found in the national accounts’ in order to estimate the significance ofsectors such as tourism that are not accounted for separately. Including the sectors from whichtourists or their suppliers buy inputs is logical in examining the nature and tourism. But it is notlegitimate then to use the data to compare the size of tourism to other sectors, because all sectorsbuy from others, and therefore aggregating sectoral accounts is double- (or multiple) counting.And there are limitations of this system in determining the potential of tourism for pro-poorgrowth. Aside from the fact that the development and reliability of satellite accounts is heavilyreliant upon the quality of the data available, as with visitor arrivals statistics the analysis isgenerally carried out at the national level and again is not disaggregated at the destination level.

Chinese outbound tourism development

Chinese outbound tourism developmentUntil 1983, the Chinese Government placed tight restrictions on the outbound tourism market. Then, following a pattern observed in many socialist economies, a slightly liberalised policy was adopted, first allowing Chinese leisure travel to Hong Kong and Macau, then to Southeast Asian countries. At that time, “outbound travel” was defined as visiting overseas friends and relatives (VFRs). Thus, these trips were sponsored financially by overseas relatives and friends so there was no drain on China’s foreign exchange reserves. With increasing numbers of Chinese travelling to Hong Kong and Macau, more and more people expressed the desire to visit their relatives in other regions. In 1990, with the approval of the State Council, CNTA, the Foreign Ministry and the Public Security Ministry, the Overseas Chinese Affairs Office announced the “Provisional Regulations on Management of Organising Chinese Citizens to Travel to Three Countries in Southeast Asia”. This regulation enabled Chinese citizens to visit friends and relatives in Thailand, Singapore and Malaysia if sponsored by their overseas relatives and friends (Dou and Dou, 1999). The Philippines joined the group in 1992.However, with the development of travelling services, VFR travel was augmented with holiday leisure travel and Chinese tourists began to outlay the Chinese currency yuan, rather than US dollars, to purchase their travel. In 1991, Singapore, Malaysia and Thailand became the first three countries granted Approved Destination Status (ADS) by the Chinese Government. Approved Destination Status means that China permits its residents to travel to selected countries for personal and leisure purposes. Thus, Chinese citizens are able to travel in groups to ADS countries on all-inclusive package tours. Subsequently, other Southeast Asian countries, such as the Philippines and South Korea, were also recognised and awarded ADS by the Chinese Government. In April 1999, Australia became the first western country opened up to the Chinese outbound tourism market. Soon afterwards New Zealand became the second western country to be granted ADS. When Chinese citizens from Beijing, Shanghai and Guangdong Province2 intend to travel overseas for leisure2 The ADS group tourism program has been expanded to nine regions in China in November, 2003. The six new Chinese regions are Chongqing, Tianjin, Hebei Province, Zhe Jiang Province, Jiangsu Province and Shandong Province (Australian Touirst Commission, 2003).8purposes, they must arrange the tour through authorised Chinese travel agents and travel in a group. The Chinese authorised travel agents will apply for ADS visas on behalf of the tourists. If Chinese citizens travel to Australia for other purposes, such as business, education and VFRs, they may arrange their tours through either authorised or unauthorised Chinese travel agents, but they have to obtain their visas on their own. Therefore, the mainstream business of the Chinese inbound travel trade to Australia is the ADS group market, whereas inbound travel for non-ADS purposes is considered a niche market in this study.A typical all-inclusive package includes international travel, private chartered coach within Australia, sightseeing excursions, local guides, accommodation and meals (mainly Chinese food with some Australian style meals). This form of tour arrangement can be compared with typical Western inclusive holiday packages (Laws, 1997) providing Chinese clients with similar advantages, particularly the benefit of knowing beforehand what to budget for their holiday, and relieving them of the anxiety of making their own arrangements in a foreign country.In addition, the introduction by the Chinese Government of so-called “Golden Weeks”, which are three standardised one-week long holidays granted annually for International Labour Day (1 May- 7 May), National Day (1 Oct-7 Oct) and Chinese New Year (also called Spring Festival), has also boosted the development of the Chinese outbound tourism market (Zhang, 1997). Up to 2003, 28 countries and regions worldwide have ADS for Chinese tourists: Hong Kong, Macau, Singapore, Thailand, Malaysia, the Philippines, South Korea, Japan, Australia, New Zealand and more recently, Cambodia, Myanmar, Laos, Brunei, Indonesia, India, Vietnam, Nepal, Malta, Maldives, Turkey, Egypt, Sri Lanka, South Africa, Germany, Croatia, Hungary and Cuba (CNTA, 2003b). Reflecting these developments, the total number of Chinese outbound tourists has grown rapidly in the period from 1994-2001 (Figure 1.3). The number of Chinese outbound tourists in organised tour groups increased to 3,695,300 in 2001, which is 30.45 percent of the number of total Chinese outbound tourists (CNTA, 2002). Other Chinese tourists are independent travellers for various purposes, such as education, business, and VFRs.