A ban on Chinese tourists to the tiny Pacific nation of Palau has left hotels empty, an airline in limbo, and shown the charged power China has over its vacationing middle income.

Key points:

The number of Chinese people to Palau had increased from just 634 people in the 2008 financial year to 87,000 during 2015, in accordance with figures from Palau’s Bureau of Immigration and the South Pacific Tourism Organisation.

But by the ultimate end of 2017, after China randomly banned state-run package tours from visiting the united states &mdash seemingly; Chinese arrivals plummeted to 58,000.

That has left some tourism operators in the Pacific island country reeling, and something airline says it has been forced to suspend operations since it can’t fill seats.

Analysts have suggested Palau’s diplomatic ties with Taiwan, being among its 17 remaining allies worldwide, coupled with Beijing’s capability to control and oversee its tourists have a whole lot related to it.

How does China control where its tourists go?

One tool the Chinese Government has at its disposal may be the Approved Destination Status (ADS).

If a national country has ADS, which means state-run Chinese tour agents are permitted to operate group package tours there.

Geopolitical intelligence firm Stratfor’s Asia Pacific analyst, Evan Rees, said the package tours constitute a big section of China’s tourism market and may have a substantial effect on recipient countries.

“Giving this ADS status to a country can massively raise the flow of Chinese tourists, around 50 % in a whole large amount of cases, so this is really a huge lever that the Chinese Government has in sending Chinese tourists abroad,” Mr Rees said.

On Palau's Jellyfish Lake

In addition to ADS, China has instituted travel bans abroad — which stops package tours from visiting those places effectively.

“It has been an emerging diplomatic weapon from China with varying impacts on regional states,” said Jie Chen, a co-employee professor at the University of Western Australia who targets China’s international relations.

Australia has been an approved destination for a lot more than twenty years, but that doesn’t mean it’s immune to pressure from China.

For example, this year earlier, Australian carrier Qantas changed just how it identifies Taiwan, after bowing to pressure from Beijing.

Other international airlines were also given a deadline to stop discussing Taiwan as a country, or face punishment.

So why is Palau being targeted specifically?

Although Palau hasn’t officially been one of many approved destinations, that hasn’t stopped Chinese tour groups from flocking there during the past decade.november

But that changed last when Chinese officials circulated a memo to visit agencies reportedly, reminding them it had been illegal to book group tours to places that weren’t on the approved list.

The memo mentioned Palau, and said agencies that booked tours will be punished there.

The move was regarded as designed to put pressure on Palau widely, which maintains diplomatic relations with Taiwan, then China rather.

“It is a pretty strong lever,” Mr. Rees said.

“About 50 % of Palau’s tourists result from Mainland China, and about 50 % of Palau’s GDP originates from tourism, so it is a strong submit the economy of a fairly small country.”

A report by the South Pacific Tourism Organisation (SPTO) found Chinese people to Palau dropped 22.7 percent between the fourth and third quarters of 2017.

Meanwhile, total people to Palau dropped by 16 % on the same period.

The SPTO’s quarterly review into visitor arrivals discovered that drop “mainly reflected the drastic fall from the scheduled and chartered flights out of this source market [China] by 63.9 % and 17.4 % respectively”.month

Last, Palau Pacific Airways, run by Taiwanese company Sea Passion Group and servicing flights between Hong Palau and Kong, of August announced it could indefinitely suspend operations by the end.

In a letter from the group to Palau’s national congress, it reportedly cited the ban from China and the resulting insufficient tourists because the reason it had to turn off.

Ms. Chen added that the rapid rise of middle-income Chinese families meant a growing amount of people could afford to visit overseas and that Beijing knew the “diplomatic value” of the.

This isn‘t the 1st time it has happened

Palm trees lean on the sandy beach.

Late this past year, months prior to the Pyeongchang Winter Olympics just, China placed a ban on group tours to South Korea in protest of the introduction of the US-backed anti-missile system called THAAD.

Seoul said the operating system was designed to intercept incoming missiles from North Korea, but China claimed it was a threat to its security.

Qantas jet taxis through Sydney Airport.

“The estimated losses for South Korea because of this tourism ban were near $US7 billion ($9.6 billion) dollars,” Mr. Rees said.

He added that China had also used the promise of package tourists as a diplomatic sweetener.

In 2000, China wished to sail a carrier it had bought from Ukraine through the Turkish-controlled Bosporus strait just, but Turkey refused.

After a diplomatic standoff of 15 months, Turkey eventually relented after China promised several perks in exchange: one of these was Approved Destination Status.

“That has been among the items that won Turkey over and saw them release the Chinese vessel,” Mr. Rees said.

A silver lining for Palau’s beautiful landscapes?

Up close of orange jellyfish in the green water.

Palau’s President Tommy Remengesau Jr shows no sign up to now that the tourism ban is enticing the united states to change diplomatic allegiances from Taiwan — actually, in a real way, the tourism ban could possibly be helping Palau.

The Pacific islands nation has been grappling for quite a while with mass tourism and the result it was wearing the surroundings.

Palau President Tommy Remengesau Jr

The Government closed Palau’s iconic Jellyfish Lake to visitors in 2017, citing removing “additional stress which may be due to visitors and human activities” because of the reason behind the closure.

Even before China’s travel crackdown, Palau has been making moves to re-position its tourism market, from Chinese package groups and towards “high yield away, low impact” tourists: fewer, higher-spending, and much more aware travelers environmentally.

South Pacific Tourism Organisation CEO Chris Cocker told the ABC that is actually a model for other Pacific nations.