Visa restrictions and their adverse economic and marketing implications – Evidence from China

Governments spend considerable public resources, including tax dollars, on marketing their cities or countries in order to become a strong brand attractive for exports, foreign direct investment and tourism. Ironically at the same time, self-imposed and strict visa regulations that can potentially hamper the productivity of marketing and branding are fairly common. There are valid reasons for imposing strict visa regulations, two of the most important being national and economic security. Although strict visa regulations are a common phenomenon around the world, the tourism academia have yet to argue against strict visa regulations by providing empirical evidence on their potential impact on tourism demand, and hence the economy. The current study is a pioneer attempt to generate awareness about the potential detrimental impacts of visa restrictions on a country’s economy, by using the case of People’s Republic of China, one of the countries known to have a history of strict visa regulations. The research reported in this paper was based on the standard tourism demand function, which models the causal relationship between tourism demand and a number of macroeconomic variables. The autoregressive distributed lag model (ADLM) was used since it has a dynamic specification that takes the time path of the tourist decision-making process into consideration by using both current and lagged values of variables. Results show the negative effect of visa regulations on both country-level and prefecture-level economies. Implications are discussed and recommendations provided.

► Visa restrictions result in losses in tourist numbers and tourism revenues. ► Loss in receipts due to restrictions after the Tiananmen Square incident: CNY 613.1 M. ► Loss in receipts due to restrictions before the Olympic Games in 2008: CNY 6592 M. ► A potential fourfold loss in the whole economy is too great an effect to overlook. ► Increments in losses are unavoidable due to diminishing productivity of marketing.