A May 23 Business article on the increase in Chinese tourists referred incorrectly to a New York travel services company. It is Travel Outbound, a division of GTA North America, not Travel Outbound Inc./GTA. (Published 5/25/04)

Thomas Leung has had it with Chinese tourists.

Five years ago, when China and Australia signed an agreement making it easier for Chinese to travel Down Under, Leung's Sydney-based Comfort Tours was fortunate to have employees who spoke Cantonese and Mandarin. Soon his drivers were hauling busloads of Chinese tourists around Sydney, to the Parliament House, the opera house and the harbor.

While tour operators and hotels in other destinations began serving up soybean milk, rice gruel and deep-fried crullers for breakfast to cater to the new Chinese travelers, Leung didn't have to change much, he said. His new customers made one demand of him: low rates. "Whatever you do, they only look at the price," Leung said in a telephone interview.

So he offered them discounts, providing transportation, two meals and accommodations for as little as $50 a day.

Business should have been booming. Last year, more than 170,000 Chinese headed for Australia, according to the Chinese National Tourism Administration. The wave of humanity, however, didn't turn into a gold mine for Leung.

The business for Chinese leisure travelers became so competitive that other tour companies began undercutting his prices. "Our [clients] more and more go to someone else," Leung said.

The exodus doesn't bother him. "We don't want to cut our price," he said.

In Canberra, Ray Scarlett agreed. "They want Mercedes-Benz service for horse and dray prices," Scarlett, the proprietor of National Tour & Charters, a tour and bus operator, said in an e-mail.

Scarlett, though, has managed to set himself apart from the competition by offering his clientele a unique sightseeing opportunity: a free tour of his house. "The women want to look in the kitchen, pantry, bathroom. . . . The men are interested in how much the house costs," he said. "They can't work out why we have a lawn instead of a vegetable garden.

"I have had a lot of feedback that it was the highlight of the trip," he added.

Competition for Chinese tourists isn't as cutthroat everywhere. But it has become a global phenomenon as the travel industry scrambles to cash in on the 25 million tourists expected to travel from the Chinese mainland this year.

In April, the Xinhua General News Service reported that Portugal has arranged to have China's largest national television network, China Central Television, broadcast a half-hour of Portuguese scenery before each match of the Euro 2004 soccer tournament, which will be held in Lisbon and seven other cities in Portugal in June.

VisitBritain, the nation's tourism marketing body, is developing theme tours for Chinese tourists, based on English literary legends such as Shakespeare -- and Harry Potter.

"Chinese travelers to the U.K. spent 127 million pounds last year -- a 60 percent increase," said Elliott Frisby, a VisitBritain spokesman. "So they're a key market for us."

What has spawned the explosive growth of Chinese outbound travel over the past five years is the easing of travel restrictions to select countries. Mainland Chinese are now allowed to travel in groups for leisure to 28 "approved destinations." China continues to add to that list. Earlier this year Beijing granted 16 European nations approved status.

Chinese outbound travel is poised to make another leap. This year, the Chinese government allowed individual leisure travel from selected provinces to Hong Kong and Macau. The start of individual leisure travel could mean that unfettered travel for all Chinese is not far behind.

Travel industry experts forecast that the number of Chinese outbound travelers will continue to grow by at least 20 percent each year.

Australia has become one of the most popular destinations for Chinese travelers, having enjoyed approved status since 1999. But Australian tourism officials are already glancing nervously over their shoulder at glamorous new competitors such as France and Italy. So the country's tourism commission has been aggressively marketing Australia in China with bus, television and print ads. One 2004 brochure directed at business travelers features a young Asian woman cuddling a koala bear. Another image from the same campaign offers a stunning view of the Sydney Opera House over the slogan: "Sydney: What better reward?"

The latter ad refers to incentive tours, which have fueled the China travel boom. Harnessing a growing interest in world travel among their employees, Chinese and multinational companies operating in China reward employees with group tours to Australia and other destinations when profit and sales targets are met.

Incentive tour groups number anywhere from 100 to 600 people and can fill more than one hotel. Most are fairly short-term, running only three or four nights -- enough for a bus trip to the Blue Mountains to the west of Sydney, a cruise on Sydney Harbour and perhaps a run up to the Hunter Valley wine country to the north.

In addition to their numbers, the Chinese bring with them growing disposable incomes. In 2002, Chinese international travelers spent $15.4 billion worldwide, an average of $1,200 per person. That amount is far less than the Japanese, who spent $26.7 billion that same year. And far less than Americans, who spent $58 billion, according to the World Tourism Organization.

From among the budget-minded masses, a class of Chinese travelers with more expensive tastes is emerging. In Australia, the well-to-do Chinese are stepping off the motor coach more often, taking in harbor cruises, whale-watching and lavish banquets complete with Australian beef and wines. They're also staying in five-star properties such as the Four Seasons and the Inter-Continental.

"Historically, the Asian market has been categorized as low yield," said James Wharton, sales manager for Asia at the Sydney Harbour Marriott, a five-star property that sits a block from the city's famed Circular Quay, a hub of harbor cruise vessels. "They love to bargain, get the cheapest deal. But that's changing. We've seen a very significant pickup in Chinese guests in the last six months."

The one destination that hasn't seen a dramatic increase lately in Chinese visitors is the United States.

Several years ago, Larry Kwan, vice president for the Far East for Travel Outbound Inc./GTA, a travel services company in New York, was busy typing up itineraries for Chinese tour groups. Hotel, transportation and a daily breakfast of congee and crullers were included. The most-requested stops were New York, Washington, San Francisco, Los Angeles and Las Vegas. "They always want to include Las Vegas," he said. "They want to see what it's like, a lot of decadence."

Until about two years ago, recalls Ricardo Conde, the general manager of the Days Inn on New York Avenue NE in the District, a Chinese tour group pulled into his parking lot at least twice a week. Conde and his staff adjusted to their quirks -- such as their constant demand for hot drinking water and their tendency to leave the doors to their rooms wide open whenever they went out.

After the attacks of Sept. 11, 2001, the number of Chinese visitors dropped off here -- even as their numbers in other destinations continued to grow. And while U.S. inbound tourism has picked up generally in the first few months of 2004, the Chinese are not returning. In 2003, 157,000 Chinese visited the United States, down from 236,000 the year before, according to the Office of Travel and Tourism Industries, a division of the Commerce Department.

"It's not lack of interest that Chinese don't come to the U.S. It's the very strict visa rules," said Travel Outbound's Kwan, referring to new requirements for fingerprinting, photographs and interviews.

"The visa situation is driving traffic," said Murray Bailey, editor and research director of Travel Business Analyst, a travel data consultancy based in St. Maxime in the south of France. "America has great attraction for the outbound Chinese market. But they can't go as tourists, so there has to be some subterfuge. Now, with [approved destination status] so widespread, why bother?"

U.S. government officials don't seem as eager as their foreign counterparts to attract more Chinese visitors. The United States hasn't applied for approved destination status. And efforts to streamline the visa application process have run into unexpected problems. In March, the U.S. Embassy in Beijing opened a call center to improve customer service for visa applicants. But Chinese government officials shut it down six weeks later, saying it wasn't operating legally.

U.S. officials deny the call center was run improperly. Chinese officials "haven't given us a specific citation. As far as we knew, we had complied with all regulations," said Stuart Patt, a State Department spokesman. "We're working with them to fix it."

While the center was open, it handled 10,000 calls a week. Now the embassy is back to its old system, where people have to appear in person and are served on a first-come, first-served basis.

The drop-off in Chinese tourists to the States has already hit American merchants who catered to them. When Chinese tour groups began descending on Eric Huang's Chinatown Gift Shop in Washington a few years ago, they coveted camcorders and notebook computers. Once the Chinese discovered they could buy their electronics in Asia, Huang said, they started buying cosmetics. The next fad was diet supplements, which are more expensive in China. Bottles of Alaska Deep Sea Fish Oil, Sheep Placenta pills and Super OPC7 -- a mix of grape seed, Swedish bilberry and pine-bark extract -- still line the shelves of Huang's store. But he said his clientele has changed. "It's gone from several groups in one day to several days and only one group," Huang said. "Now we have to diversify, get more items for local people."

Some travel industry insiders worry that the United States is missing out on a lucrative market. In 2002, the record year for Chinese tourism in America, Chinese visitors spent $958 million here. "My concern is the U.S. is not in a position to take advantage of this trade," said Richard A. Webster, director of government affairs for the Travel Industry Association of America. "We may be shutting ourselves out of a key market."

U.S. companies, and at least two states, are not waiting for Uncle Sam to nab a piece of the Chinese outbound tourism traffic. In 2002, American Express launched a joint venture with the Chinese International Travel Service to offer travel services to corporate clients. Las Vegas Sands Inc., which owns the Venetian Resort-Hotel-Casino, just opened a new casino resort in Macau, which is a special administrative region of China, a status similar to that of Hong Kong. And on June 11, Nevada will become the first state to open a tourism office in Beijing. Meanwhile, Hawaii and Guam are seeking approved-destination status.

Nevada tourism officials are in the right place, according to National Tour's Scarlett. He said he would hardly be able to keep up with his Chinese clients, who, after rising at 4:30 a.m. to take day trips to other cities in Australia, hit the casinos until the wee hours of the next morning. During the day, Scarlett said, many of his customers end up snoozing on the coach and even missing appointments. They stay awake long enough to get their pictures snapped in front of famous sights.

"All in all," Scarlett noted, "they're a lot better to work with than a bunch of yobbo footballers."

Peter S. Goodman contributed to this report from Sydney.

An Australian ad aims at Chinese business travelers.