Taiwan's China tourism gain in doubt as polls near

TAIPEI, Taiwan - Campaigning for office in 2008, Taiwan's president promised an economic windfall of $2 billion a year by opening the gates to Chinese tourism. If Taiwan's tourism bureau is to be believed, President Ma Ying-jeou has achieved precisely that as he heads into elections in January for a possible second term.

But interviews by The Associated Press with industry officials and Taiwanese tour operators, and an examination of China's Taiwan tour packages, suggest that the figure has been overstated by at least $700 million. Questions about the accuracy of the government's claims could prove embarrassing to the China-friendly Ma as campaigning heats up.

Tourism has been a big part of Ma's push to deepen links with China, and his re-election campaign is expected to once again tout the benefits of hitching the island's relatively small economy to China's lucrative markets.

China claims Taiwan as part of its territory, 62 years after the two sides split amid civil war. While trade between the sides and Taiwanese investment in China has flourished for the past two decades, Chinese visitors were kept at arm's length until Ma took office in 2008.

Ma reversed his predecessor's China-averse policies, initially sanctioning 300 Chinese arrivals a day. Until late June, when the first individual visitors crossed the 100-mile-wide Taiwan Strait, all tourists had to come on tour packages.

According to the Taiwan Tourism Bureau's Alice Chen, the Chinese tourist influx has meant big money for the island of 23 million people. Chen says that in 2010 some 1.16 million Chinese tourists spent $59.1 billion in Taiwan, providing a substantial boost for an industry long in the doldrums.

The bureau's figures, Chen says, were collated on the basis of interviews at airports with just 1,896 of the million-plus Chinese visitors, rather than relying on hard data from vendors of tourists services - hotels, restaurants, shopping venues and the like.

In response to a query, Ma's spokesman, Fan Chiang Tai-chi, referred the AP back to the Tourism Bureau, whose deputy director general Wayne Liu repeatedly refused interview requests. Chen said she could not explain the discrepancies.

On the Taiwanese side, tour operators say they are taking the brunt of the China revenue shortfall, operating at a loss and churning tourists through shops that promise hefty commissions on sales to claw back some profit.

The government estimates that Chinese tourists spent an average of $246 a day on the island in 2010. That's made up of $142 for shopping and $104 for the services that are provided by tour package operators - hotels, meals, local transportation, venue admission and incidentals.

But an examination of tour package prices shows they are much lower than the goverment's estimate and tour operators say that, at best, they get half of the money Chinese tourists pay to mainland tour agencies for these tours. That amounts to at least a $700 million hole in the government figure.

On top of that, it is likely that some of the money Chinese tourists spend on shopping is ending up in Hong Kong, where the owners of some of the major Taiwanese shopping outlets are based.

And at least until recently, a ruse involving special credit card readers that disguised the true location of purchases meant the government was cheated out of sales tax from Chinese tourists. Taiwanese authorities are now investigating this practice.

The typical Taiwan tour lasts eight days and costs between 3,700 and 8,000 yuan ($574 to $1,240), depending on airfare from the Chinese point of embarkation.

Tours that leave from China's Fujian province across the strait provide a good benchmark for working out the tour package cost excluding airfares. Spread over eight days - and assuming $100 for transportation across the strait - the package averages out to $60 per day.

Taiwanese tour operators say their Chinese counterparts now offer them as little $20 per tourist per day, which is far below the $50-55 they say they are spending to procure hotel rooms, meals, and other services for their Chinese customers.

This is forcing operators to provide substandard tours, said Fauzy Wu, an official at Taiwan International Tour Manager Development Association who once supported closer tourist links with China.

These feature cut-rate hotels, greasy spoon meals, endless bus rides from one out-of-the-way hotel to the next, and nonstop visits to glitzy shopping venues that promise high commissions of as much as 50 percent to operators.

"Chinese tourists are getting up earlier than roosters, eating worse than pigs, and are totally exhausted from spending most of their days on intercity buses," Wu said.

Opposition presidential candidate Tsai Ing-wen and her Democratic Progressive Party charge that Ma and his ruling Nationalists have sold Taiwan short in their bid to draw Taiwan's economy ever closer to China's. The tourism problems could buttress those arguments.

They might also be problematic for China. Beijing is far more partial to Ma than the DPP, which it reviles for its theoretical stand in favor of formal Taiwanese independence.

The Taiwan operators say their current business model has been foisted on them by tour operators from the Chinese territory of Hong Kong. These Hong Kong operators comprise only 13 of the 300 operators the Taiwan government sanctions to receive Chinese tourists on the island, but rake in some 50 percent of the take.

Local operators say their Hong Kong counterparts have leveraged their familiarity with the Chinese tourist market and the lack of restrictions placed upon them by the Taiwan government to dominate business.

"Hong Kong has the worst group tour business model," said travel agency proprietor Hsu Chin-rui, who is also chairman of a cross-strait travel association. "We do not welcome their agents here."

Hsu says the problems with Chinese tourism don't end there.

At least half of the 164 Chinese tour agencies allowed to sign up customers to visit Taiwan have poor payment records and Taiwanese tour operators are owed about NT$5 billion.

The Tourism Bureau says it's powerless to fix the situation.

Taiwanese tour guide Jack Lee complained about the late payments and said they were having a knock-on effect on tour guides like himself, as Taiwanese agencies were failing to pay subcontractors on time.

"I myself am owed $300,000," Lee said. "And there are many others like me."