China has imposed a new Olympics-related visa crackdown in recent weeks, resulting in sharp declines in inbound visitors. The government has called the move a “temporary measure,” which is intended to allay Olympics-related safety concerns. However, tighter visa controls are having an affect on business and leisure travel and a corresponding impact on lodging demand.

A Wall Street Journal article reported that inbound travel from the US, Japan and Korea to China for the month of April was down 17.2%, 24.4% and 11% respectively from a year earlier. In addition, inbound travel from Hong Kong and Macau is down 30% year on year.

The tighter visa measures were unexpected and the impact has been worse than originally anticipated. Even expats residing in China are being asked to go outside of China to renew their visas and some are being refused re-entry.

The expectation amongst hoteliers is that the Chinese lodging market will expand in leaps and bounds in the coming years with many developers and operators banking on that fact. The outlook for new hotel development in China is staggering with 1,021 hotels in the current pipeline with 274,211 rooms coming online, according to a recent article in National Real Estate Investor.

Some already fear a glut of new product in the market and oversupply, but the dynamics are very hard to foresee. The strengthening Yuan is further exacerbating the situation, as it is becoming increasingly expensive to visit China, particularly Shanghai. However, many people believe that domestic demand will increase markedly in the coming years and this may well soak up excess hotel capacity but of course, time will tell if this prediction is correct.

More stringent visa policies for foreigners traveling to China certainly doesn’t bode well for the long-term strength of the Chinese lodging market. The mere uncertainty regarding visas may be enough to curb some development that hasn’t already gone past the point of no return. It will be interesting to see how investors and operators react to these new restrictions. Moreover, it also remains to be seen whether foreign visitors will simply choose to go elsewhere.