Last updated: 02:39 PM ET, Tue August 11 2015

China's Yuan Devaluation Will Have Small Impact on Travel

Destination & Tourism | James Ruggia | August 11, 2015

China's Yuan Devaluation Will Have Small Impact on Travel

PHOTO: The Great Wall got a little lower as the People’s Bank of China devalued the yuan this morning. (Photo by Virginia Haynes)

Tour operators were unconcerned by the devaluation of the Chinese yuan this morning. With its exports stuck at the docks and a few months after its stock market tanked, the government-controlled People’s Bank of China decided to spur export sales with a yuan lowered by 1.9 percent. Chinese exports decreased by 8.3 percent in July, their steepest decline in four months.

While inbound tourism is as much an export as outbound manufactured goods, the operators we spoke to seem indifferent to the change in the yuan’s value. This morning the dollar was worth 6.31 yuan. A few months ago it was set at about six.

“It’s not as major a move as it is when the euro drops,” said Bob Drumm, president of Alexander + Roberts. “China is already one of the great travel bargains. Its five star hotels cost half as much as similar quality hotels everywhere else.”

“If this changes things at all, which is unlikely, it will only turn up over the very long term,” said Howard Smith, the president of China Smith. “Most deals are done in dollars in China. It will make commodities less expensive, but hotels won’t be reducing prices.”

“I’m doing my negotiations for late 2016 and 2017 now,” said Drumm. “Our current product line came out last month. It’s already a good buy. One impact will be felt by shoppers in China. Americans love to shop there and this will enhance that.”

“Hotels were already priced at a low rate,” said Charles Mann, president of Sino American Tours. “Any impact will take place over the long term.”

The dollar’s value rose by some 0.4 percent on average against other top currencies because of the yuan’s devaluation. The 1.9 percent decrease is the largest such decrease that the yuan has undergone since it unpegged from the dollar in 2005. The decrease is likely to have its biggest impact on outbound Chinese travel.

According to the operators, business to China has been stable but soft. “It’s not bad,” said Drumm, “but it’s soft. Advance bookings suggest a much stronger year next year.” A little more than 2 million Americans go to China per year, a number that has grown 60 percent over the last eight years according to PhoCusWright.

The move will likely increase the volume of political rhetoric between the U.S. and China and do more to damage U.S. travel there than any accentuation of what’s already a good value. China’s move to devalue the yuan will no doubt force a rebuke from the United States because it will make our exports harder to sell, thus hurting jobs here.

A growing animosity by Americans based on China’s perceived economic dominance is a concern. Political rhetoric based on these perceptions only sustains the animosity.

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