Tourism is one of pillar industry supporting Hong Kong ...



MKT 6061

Seminars on Current Business & Management Issues

EMBA 2006

Group Project:

"Where should Hong Kong Tourism be heading?

In view of the emergence of China and other Asian economies and their competition as tourist's destination cities,

how Hong Kong can realign its strategies

for the competition and the new opportunities”

Group 8

Andrew Law Lai-wah, Student ID04426080

Corinna Yuen Kwok-yee, Student ID04424670

Millicent Mak Lai-sim, Student ID04268740

Queenie Fung Shuk-fun, Student ID04267750

Thomas Tong Tung-ming, Student ID04269240

Virginia Wan Man-yun, Student ID04269400

Table of Contents

Acknowledgments 1

Executive Summary 2

Introduction 3

Background 4

Current Situation 5

1. Tourism Growth Factors and Changing Behaviours 5

2. Visitors Arrivals Trend 7

3. Current Strategy From Hong Kong Tourism Board 7

4. Tourism Current Trend 9

Analysis 11

Buhalis’ new 5Ss framwork 11

Left Circle Analysis 14

Recommendation 18

Conclusion 23

Exhibits 24

Exhibit 1 – Tourism Percentage Share of GDP 24

Exhibit 2 – Visitors Arrivals 1999 - 2005 25

Exhibit 3 – Detailed Tactics of HKTB’s 2006 Strategies 26

Exhibit 4 – Major Attractions and Spending Patterns 27

Exhibit 5.1 – SWOT Analysis 29

Exhibit 5.2 – Porter’s 5 Forces Analysis 30

Reference 31

Acknowledgments

We would like to thank Professor Andrew Chan for providing guidance and directions for the project, and whose strong connections with Hong Kong Tourism Board (HKTB) facilitated the successful collection of useful information, including a meeting with Ms Clara Chong, Executive Director of HKTB.

We are also particularly indebted to Ms Clare Chong, who afforded her valuable time out of her busy schedule. During the meeting, Clare gave us a lot of insights, i.e. what HKTB does in order to promote the tourist in Hong Kong to the Mainland China, Asia and other countries.

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Executive Summary

Tourism is the act of travel for the purpose of recreation and business, and the provision of services for this act. A more comprehensive definition would be that tourism is a service industry, comprising a number of tangible and intangible components. The tangible elements include transport systems - air, rail, road, water and now, space; hospitality services - accommodation, foods and beverages, tours, souvenirs; and related services such as banking, insurance and safety and security. The intangible elements include: rest and relaxation, culture, escape, adventure, new and different experiences. ()

We notice that the tourist industry is growing rapidly in recent years especially after the introduction of Individual Visit Scheme (IVS) to the Mainland China. We are not sure whether the current tourist infrastructure can sustain the coming growth. Thus, the purpose of this paper is to study the current situation of the tourist industry in Hong Kong including the tourist growth and its behavior, arrivals trends, the current strategy from Hong Kong Tourism Board and their current trend. Based on this information and using ‘Left Right Circle’ theory, we conducted an analysis so as to device the new needs of the visitors.

Based on the needs analysis, a series of actionable recommendations are provided so as to further promote the tourist industry in Hong Kong.

Introduction

Harold Vogel stated that “The urge to travel is universal” because people are born with innate and insatiable curiosity. (Vogel, 2001)

Michael Elliott also stated “The freedom to travel safely and cheaply is one of the great blessings of our time – something that immeasurably expands the range of human experience” (Michael Elliott, Time Magazine).

Based on the above, we have no doubts why number of visitors travel around to Hong Kong. In 2004, the total visitor arrivals reaching a record 21.18 million, a 40.4% increase on the previous year and 31.7% more than the previous all-time high set in 2002. (Annual Report 2004/05, Hong Kong Tourism Board). A total of 23.4 million visitors arrived Hong Kong in 2005.

The tourism industry accounts for 2.9% of Gross Domestic Products (GDP) among the below pillar economic sectors of Hong Kong in 2005.

• Trade and logistics – 27.7% of GDP in terms of value added

• Financial services – 12.2%

• Professional services and other producer services – 10.6%

Despite the fact that the growth gave prominence to us, the world is changing at a faster pace than ever; we face severe competition among Asia Pacific region, i.e. Singapore, Taiwan, Korea, and Malaysia. Hence, the purpose of the paper is to realign the tourist strategies for the competition and to identify any new opportunities so as to compete with other Asia Pacific region.

Background

According to the World Tourism Organisation (UNWTO), a United Nation’s specialised agency, Hong Kong made a spectacular entrance into top ten tourism destinations. Despite the 6.2% decline in visitors number during the SARS outbreak in 2003, a series of promotional efforts and the mainland government’s introduction of Individual Visit Scheme (IVS), Hong Kong’s tourism industry picked up and ranked seventh in the world subsequent to a 40% increase in arrivals in 2004.

The UNWTO also forecast that China will be the world’s largest inbound tourist market by 2020, and that Hong Kong will be No. 5 in its own right with more than 56 million visitors.

The total numbers of visitors reached a record high at 21.81 million in 2004. Inbound tourism expenditure rose to HKD91.85 billion.

The main top five source markets of visitor arrivals to Hong Kong in 2004 are as below:

|Ranking in 2004 |Markets |No of Arrivals |Share of Total (%) |

|1 |Mainland China * |12,245,862 |56.1% |

|2 |Taiwan |2,074,795 |9.5% |

|3 |Japan |1,126,250 |5.2% |

|4 |USA |1,051,696 |4.8% |

|5 |South Korea |539.190 |2.5% |

As a result of the progressive extension of IVS, 4.26 million, or 34.8% of the total Mainland arrivals travelled to Hong Kong under IVS.

Source: Hong Kong Industry Performance 2004 Highlights

Current Situation

Hong Kong is one of most international cities in the world, and is arguably the most international city in Asia, as we pride ourselves as “the Asia World City”. Tourism is one of four pillar industries supporting the Hong Kong economic growth; it is important to have both the short-term and long-term strategy right to ensure we capture the maximum growth benefits from the industry.

1. Tourism Growth Factors and Changing Behaviours

Amrik Singh, in his paper Asia Tourism Industry: Current Trends and Future Outlook, explains that tourism growth in Asia Pacific results from various factors—economic growth improved population income level, which in turn instigated improvement in working condition and demand of leisure time. Improvements in economic condition also brought about political stability and reduce travel restrictions. The globalisation, open architecture, and blue ocean strategy also have accelerated the liberalisation of air transport and caused improvement in technology leading to the reduction of travelling cost.

According to the UNWTO, these recent phenomena have fuelled the long-term increase trends of arrivals. In 2005, there were 808 million arrivals worldwide, representing a 5.5% growth. The prospect for 2006, though smaller than that of 2005, is somewhat above the long-term average annual growth rate of 4.1% (UNWTO News 1/2006).

Among the worldwide growth trend, Asia-Pacific and Middle East have had the highest growth, at 7.0% and 8.8% per annum respectively since 2000, in which Asia Pacific has a much larger growth base than Middle East.

|　 |Full Year |Avg |Share |

| |2000 |2001 |2002 |

|World |

Liberalisation, coupled with technological developments such as more fuel-efficient aircrafts (Singh), has had significant, positive impact on the travel industry in Asia Pacific and will continue to do so in the next decade.

Tourism’s contribution to the overall Gross Domestic Products (GDP) of Hong Kong, however, has been moderate for both inbound and outbound tourism, at 2.9% comparing to over 50% share by the entire four-pillar industries. The economic and employment contributions from inbound tourism are difficult to measure, as the activities comprise a range of economic activities straddling different industries, e.g. retail, restaurants, transport, hotel and personal services. To estimate this, the Organisation for Economic Cooperation and Development (OECD) recommends the compilation of tourism ratios for selected tourism-related economic activities to allocate value added and employment of these economic activities to inbound tourism (Hong Kong Monthly Digest of Statistics, December 2003). Exhibit 1 indicates a 20% to 50% growth in the related industries including hotels, restaurants, transport services and the like from 2000 to 2004.

2. Visitors Arrivals Trend

Visitor arrivals in Hong Kong peaked in 1996 at 12.97 million as visitors came to witness the colonial Hong Kong before its handover to China. Subsequently visitor arrivals in 1997 and 1998 waned, added to it was the Asian financial crisis; total arrivals dropped to 11.27 million and 10.16 million respectively.

Visitors arrivals stabilised and regain momentum since 1999, then the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003 dwindled the arrivals from 16.56 million in 2002 to 15.54 million in 2003. It is interesting to note that visitor arrivals increase for 2004 was 40%; however, the composition of visitors changed due to the introduction of Individual Visit Scheme (IVS) by the Hong Kong SAR Government with Beijing’s blessing since mid 2003. Although the growth was ubiquitous from all regions (except Taiwan), the share of visitor arrivals from Mainland China has changed the dynamics of tourism industry in Hong Kong completely.

According to Clara Chong, Executive Director of HKTB, the source of visitors from IVS will expand from current 30 cities to 38 cities in 2006, mostly in Pearl River Delta, Yangtze River Delta, and Bohai Rim regions. See Exhibit 2 for details.

3. Current Strategy From Hong Kong Tourism Board

Since the recovery from the economic downturn, Hong Kong tourism has picked up quite rapidly. The introduction of Individual Visit Scheme (IVS) in mid 2003 boosted the mainland tourist arrivals from 30% in pre-IVS to 54.5% in 2003. In 2005, total arrivals has grown 7.2% to 23.4 million arrivals; the overnight visitors’ average length of stay has been maintained at 3.7 nights while the total expenditure associated to inbound tourism has grown to $105.66 billion from $92.62 billion in 2004. The overall satisfaction from visitors has improved by 0.3% to 8.3%.

While the Hong Kong Tourism Board is working closely with hoteliers and developers and the Tourism Commission on the hotel supply, the town planning and land sales rest with the Planning Department and Lands Department respectively, with Housing, Planning and Lands Bureau as the policy bureau. Tourism Commission is the government counterpart for input / feedback to their planning counterpart when appropriate.

Here are HKTB’s strategies:

• Strengthen partnership and enhance trade and consumer activities to ensure Hong Kong remains the primary destination among Mainland travellers

• Maintain a balanced portfolio of visitors from different geographical market, i.e. long- and short-haul markets, by positioning Hong Kong as an international city and broadening its appeal beyond shopping and dining through infrastructural projects and increase diversification of experience

• Make HK the ultimate choice for conventions, exhibitions and business meetings, and to encourage business travellers to stay longer in HK and better still, to bring their families and friends

• Emphasize high quality high yield arrivals (business and family) and high potential markets (South Korea, Philippines and Thailand)

Together with the new promotional initiatives and events to be staged, the outlook for 2006 is expecting to be positive with total arrivals hitting 27 million and associated total expenditure* $114.7 billion (Tourism Commission). See Exhibit 3 for detailed tactics of 2006 strategies.

(*The Tourism Expenditure Associated to Inbound Tourism comprises two main components:

Destination Consumption Expenditure and Passenger International Transportation Expenditure.

Destination Consumption Expenditure is the sum of payments made by all inbound visitors and travellers for goods and services that they consume in Hong Kong. It includes expenditure of six main categories of visitors, who are overnight visitors, same-day in-town visitors, cruise passengers, transit/transfer passengers, servicemen and aircrew members.

Passenger International Transportation Expenditure represents the receipts of Hong Kong based carriers for the cross-boundary transportation of non-resident visitors by air, sea or land.)

4. Tourism Current Trend

Since the tourism revival in 2004, visitor arrivals and associated expenditure have grown rapidly. UNWTO forecast that China would be the world’s largest inbound tourist market by 2020 and that Hong Kong alone will be No. 5 with more than 56 million visitors. In order to materialise this expectation, HKTB has researched for statistics for the study of major attractions and spending patterns among visitors. (See Exhibit 4)

HKTB also identified the following trends:

• Travellers are increasingly looking for experience, a desire to carry out a particular activity rather than going to a destination for the sake of the destination

• More demand on authentic experiences of local culture and closeness to nature, especially among the older age groups

• Consumers are increasingly unpredictable. They may combine five-star deluxe accommodation with a no-frills flight, or have fast-food snacks one day and a slap-up meal the next.

• Free Independent Travel (FIT) continues to shape the future of travel product distribution towards user-friendly Web sites allowing for direct bookings and dynamic packaging.

Analysis

To have a better analysis of the current situation, it is better we start with the customers needs using the Left Circle Theory. On top of this, we also use Buhalis’ new 5Ss tourism framework to understand the macro development of the tourism industry.

Buhalis’ new 5Ss framework

In the article by Dimitrios Buhalis, he explains the dynamic trend of tourism phenomenon and the demand of the new tourist and consumer, and provides a framework of analysis (Wahab and Cooper 69-92). The trend in a developed country is that every worker is expecting a four weeks holiday annually, and they will budget it to do so. By 2010, globally there will be 964 millions of trips aboard, excluding day trips requiring 8 billion nights staying aboard spending US$ 922 billion in 1995 US$ term (HK$7,173 billion), and the growth of South East Asia will almost double in 15 years between 1995 and 2010 from 3.5% to 6.9% of the total world’s share. These tourists are becoming more experienced, and technology are revolutionising the way tourists would like to use their time during holidays. People are more experienced through this information age; they would like to live their holidays rather than just spent it. They are more aware of the impact of ecology and environmental concern; the globalisation has flatten the world to become more multi-cultural, and the tourist of modern and post modernity would look for edu- and enter-tainment to use their leisure time for personal development as well. Buhalis argues that the traditional tourism products will no longer be adequate for the recreation of the new affluent generation of tourists emerging, who would look for a more individualised product and a complete experience for the visit. The tourism demand trends are going through a transformation from the 4Ss framework for seaside tourism (Seas-sun-Sand-Sex) and the 4Ss framework for urban tourism (Sightseeing-Shopping-Shows-Short breaks) to the 5-S’s framework model, namely sophistication-specialisation-segmentation-satisfaction-seduction.

Dynamic tourism demand trends

In a nutshell, the previous 4s model are more product-oriented, focusing more on the right circle, on the “what ”. However, moving forward, we should focus on the left circle, identifying their wants and needs. In the process, segmentation and specialisation are required. It is no longer a “mass tourism approach” but one to gives rise to niche tourism, catering to their special needs.

According to latest trends, customers prefer the following types of niche tourism[1]

|CULTURAL |ENVIRONMENTAL |RURAL |URBAN |OTHERS |

|Heritage |Nature and wildlife |Farm/barns |Business |Photographic |

|Tribal |Ecotourism |Camping |Conference |Small cruise |

|Religious |Adventure |Wine/gastronomy |Exhibition |Volunteer |

|Educational |Alpine |Sport |Sport |Dark |

|Genealogy |Geotourism |Festivals and |Gallery |Youth |

|Research |Coastal |events |Art |Transport |

| | |Arts and Crafts | | |

With the world becomes flatter and flatter and travel barriers fewer and fewer, the world visitors become more and more widely exposed or spoiled and more demanding, an approach focusing on customer experience management is the key to success. There are more sophistication and satisfaction in the experience economy.

As it is quoted, “Goods are commoditized, services are customized, and experience, and only experience could be individualized”; and as Chris Ryan puts, “The tourism “product” is not the tourist destination, but it is about experiences of that place and what happens there”[2]. More and more customers are looking for uniqueness, from mall design to product design; and from retail experience to e-experience. Individuals are also looking for intimate, subjective and emotional experiences. So far mass tourism with packaged and standardized-leisure services at fixed prices targeted at mass clientele are popular but are lacking in differentiation in individual experience. The tourism market could no longer be considered as a homogeneous one, and should start to apply the niche approach. And that requires a knowledge process involving producers researching, identifying and targeting specific audiences and maintaining a relationship with them in the face of competition[3]. The development of niche products is essential in order to capture new and more profitable markets, either by creating a new customer base or by addressing key issues of the existing base. To develop niche tourism, we need to take a customer-focused approach. We could look at what specialty activities tourists are seeking in order to have a satisfactory holiday experience.

Left Circle Analysis

We will concentrate on a few levels of the left-circle theory to identify current and future needs of the tourist industry. In addition we have conducted a brief analysis using OTSW (SWOT) and Porter’s 5 forces model for better understanding of the situation. (See Exhibits 5.1 & 5.2)

1. Old Left Circle, New Needs

It is recorded about 60% of the tourists are repeated tourists owing to business needs or the need to bring their family members to Hong Kong. These are the old left circles. They come again because they treasure those particular activities like shopping, food and dining and so on. As mainlanders are more concerned with their kids' development, they may require more edu-enter-tainment. In addition, they are looking for more in-depth experience on wine and dining.

2. New left circle

i) Event perspective – Rugby Sevens and Rugby World Cup held annually and every four years respectively are good examples of successful differentiation that attracts a special segment of tourists as depicted by Buhalis. For the past 6 years, this event consistently brought in overseas visitors, who accounts for over 50% of total audience from key long-haul markets such as Europe, Africa, Middle East, Australia, New Zealand and South Pacific during that period.

2001        19,798 overseas visitors out of 38,000 (52%)

2002        20,815 overseas visitors out of 39,883 (52%)

2003        15,418 overseas visitors out of 31,716 (49%)   SARS

2004        19,009 overseas visitors out of 40,000 (48%)

2005        22,146 overseas visitors out of 40,000 (55%) 

We could organise similar events for football, soccer or table tennis well accepted by increasingly affluent Asian neighbours, especially our traditional visitors like Japanese, Koreans, and Taiwanese. Although Hong Kong may not be seen as world-class in terms of football, we also have successfully held soccer game inviting Royal Spanish Madrid during the SARS period.

ii) Geographic perspective – While many emerging economies, such as India, still appears to be too huge and too poor to do cost-efficient marketing. However, effort can be focused in the more affluent group in cities like New Delhi, Mumbai, and Bangalore. Indians also have a significant presence in Hong Kong, most of whom are quite well to do and still have strong ties within their homeland and can be encouraged to bring friends and relatives here.

South Korea is another new left circle example. Koreans nowadays travel most frequently and widely than all time. The country has emerged as a strong Asian hub in technology invention and innovation.

iii) Demographic perspective – HKTB also segments its customers in socio-economic terms and identifies the “business” and the “family” groups. If we widen our perspective by asking who are those people we never assumed to be potential visitors, we may find ourselves looking at “students”, “housewives”, who are thought as having little financial resource to be our target audience. “Students” in fact are very worthwhile to market to, in the short-term for the word-of-mouth they are to spread on their return, and in the medium- and long-run for repeat visits after a few short years when they become a much lucrative group who retains nice memories of the places they visited.

A trend of learning the Chinese culture and language is seen as China is gaining political and economic influence in the world. The mainland China is definitely to capture increasing share of the world’s travellers, among them many never thought about visiting China. Hong Kong is in a best position to capitalize on and benefit by this trend.

3. Inner Left Circle

Local Travel Agencies of different countries are the Inner Left Circle for HK tourism. Their support on promoting HK as a tourism destination is one of the critical success factors of HK tourism development. The needs of the Local Travel Agencies are

i) Business revenue maximization through the transactions

ii) Good support from the business partners in HK like travel agencies, hotels, airlines etc so that they can provide the tourists with hassle-free solutions

4. Seemingly unrelated needs & Inability to articulate need

Under the IVS scheme, the first batch is more affluent class who come mainly for the shopping experience. Other than the cheaper price point in HK as compared to China, HK products especially medicine or cosmetics have the privilege of authenticity. Other than serving the physical and real needs, the purchase of authentic products also give a boost of confidence as a smart purchaser.

The second batch will comprise of people who have relatives in HK or some who are just here for same day visit. But as more and more cities are open, the continuous influx of mainlanders should be the rising middle class who has a need to tell the peers that they’ve been to HK, as HK with its historical background still has its attraction. Besides, they are also keen to see how HK compare to their hometown in terms of development, and seeing HK’s strengths and weaknesses may also give them a boost of confidence. However what’s most important are their growing needs of the middle class to look for investment opportunities as well as a concern for health issues (when people have more money, they are ready to pursue health), and HK is more reliable in providing these services. While China may still be building up the reservoir of expertise, HK has a niche in this.

5. Left Circle of Left Circle

It targets Family group from Mainland China with one or two kids. With the growth in economy, Chinese parents are willing to spend more on their kids for their enjoyment of childhood. The preference of kids on a certain extent affects the choice of travel destination.

It targets Business Travellers that come to Hong Kong or neighbouring cities to attend meetings, conventions and exhibitions. They are the high yield segment and are encouraged to stay longer with their families for leisure purpose.

Recommendation

Based on the above analysis of unfilled needs and we recommend the following actions:

1. Chinese Culture Experience and British Colony History

• Hong Kong should build more culture centres, for example, a culture corridor in West Kowloon of Musical and Drama and to promote those as built museums such as police, marine as one of the culture heritages in Hong Kong.

• To leverage on the new China goers, brand Hong Kong as the “Gateway to the Chinese Culture” by offering a preview experience into learning the Chinese culture and history. Hong Kong has the capacity to assemble an array of activities that offers a first, condensed glimpse or essence of China experiences

2. Chinese food with different provinces’ cuisine

• Hong Kong has strong culinary credentials—from Asian to Western cuisines to fusion experiences. While HKTB also emphasises dining as one of HK’s core competencies, but we may not have targeted at the right customers. The left circle influence may be those “Gastronomy experts” in each country who could give a lot of references and credibility to the peoples concerned. Additional opportunities like the following could also be identified through this channel.

- Create relationships with customers – the opportunity to meet staff and to see behind the scenes can lead to positive relationships with consumers, which may lead to both direct sales and indirect sales through positive “word of mouth” advertisings.

- Increased consumer exposure to product and increased opportunities to sample product than through normal retail outlands

- Marketing intelligence on products and customers. Producers can gain instant and valuable feedback on the consumer reacting to the existing products, and are able to trial new additions to their product range. Visitors can be added to a mailing list which can be developed as a customer base to both target and inform customers” [4]

• Visitors like to have ‘Dim Sum’ in Hong Kong; chef should create different variety of dim sum so as to fit their tastes.

• Special packages of Dinning Tour may create new market segments

3. Emerging markets

• Look closely at the emerging or the increasing affluent markets and do careful segmentation can help achieve a more balanced portfolio and increase sustainability of Hong Kong’s Tourism

• Identify the best-fit, focused and cost-effective marketing efforts, e.g. promotion to ethnic groups like Indians as they are one of the fastest development economies after China

• Special, preferential offers for students through cooperation with overseas

Embassies and universities

4. New Services and new coming reasons

• HK should promote the brand as a trustworthy and reliable source of all kinds of products. Service and price is only one of the aspects but authenticity is something you cannot match. Of course there should also be self-monitoring system to maintain the reality is living up to this standard. Investment and health care services (including private hospitals which have over capacity) can be marketed. Professionalism and reliability is the key focus.

• Cooperate with neighbouring cities in major business events, say, hosting related exhibitions of Guangzhou Export Commodities Fair in spring and autumn in Hong Kong. Establish new venues for large scale international conventions and corporate meetings in Hong Kong

• HKTB encourages travel agencies, hotels, airlines, etc to provide more promotion offers to the local travel agencies of different countries so that they can attract more orders from the tourists and hence the business revenue can be maximized.

5. Information channels

• The world changes pretty fast and what works today may not work tomorrow and we have to anticipate both the current as well as the future needs of the travellers. Back then before the IVS, mainland tourists only represent less than 30% of inbound visits but they are now the majority. Mainland tourists’ needs are very much different from that of overseas travellers, and even among the mainland tourists, the purchasing power, pattern and even purposes of visit can change with time. They may like more medium-priced hotels or stay with relatives, and purpose of visits may vary. A majority may not be staying overnight. Therefore we have to anticipate the demands of the future customers. It seems we lack such a structural approach, and the latest survey regarding customers reference (whether those who have already come or those who has not chosen HK as their number spots) was done back in 1998. Most of the surveys focus on the average expense, average stay, which, though relevant, are not very useful in exploring the needs of the future travellers.

HKTB is working very hard to attract tourists from different areas, but more so from a product-related approach, where the presence of activities, attractions, and food are emphasized. A survey conducted by Taiwan in 2004, which can be used as reference though the traveller mix is not entirely similar to that of HK, indicates that preferences varies significantly among different types of customers. Japan, for example, has chosen Cuisine as the reason for visits while western countries (mainly USA) consider culture and scenery the major reason for visits. Cuisine only comes in third for the overseas travellers. Around 50% of visitors will use the Web as an information source and the use of Internet on the increase and this is a trend not to be overlooked when selecting the channels for promoting Hong Kong tourism.

6. Virtual tourism

• The internet, other than supporting the individual travellers to plan for holidays, there is an increasing on line ordering of reproduction of physical artefacts from postcards to pottery and for the purchase of digital artefacts. In the west, this is a growing area in a few key museums and this could be an area of exploration.

Conclusion

While we admit we are quite successful, it is a big market and intense competition in the years to come. At the same time, new opportunities will arise. We should not remain too complacent; we must be able to gauge the changing trends in the tourism generating countries and make an attempt to satisfy the needs and wants of their customers or else products will get obsolete gradually.

In addition, to promote the tourist industry is every citizen’s responsibility. We should extend our hospitality to tourists. In short, the success of the future tourist industry requires the participation from all, including the government, the industry and the individuals.

Exhibits

Exhibit 1 – Tourism Percentage Share of GDP

From the table below, retail trade share has increased from 0.3% to 0.5% from 2000 to 2004. Although that may not look large, it is a 66.67% increase for the period or running at 33.33% increase per annum for 2003 and 2004. Other segments such as hotels, restaurants and cross-boundary passenger transport services also had recorded healthy growth ranging from 20% to 50% for the same period. This represents a healthy improvement in tourism industry and its incremental improvement in total shares to the GDP. Although the statistics for 2005 is not available yet for percentage share to GDP, further increase is certain, as the total expenditure spent by visitors had grown 14%.

|Value Added of Inbound Tourism |2000 |2001 |2002 |

|and Outbound Tourism 2000-2005 | | | |

|Percentage share (%) to GDP | | | |

|　In Thousand (000) |Amount |%Total |Amount |%Total |Amount |%Total |

|The Americas |1,155.30 |10.20% |1,295.90 |9.90% |1,258.60 |9.20% |

|Europe, Africa & Middle East |1,149.10 |10.10% |1,223.10 |9.40% |1,171.40 |8.50% |

|Australia, NZ & South Pacific |361.6 |3.20% |416.8 |3.20% |386.8 |2.80% |

|North Asia |1,465.10 |12.90% |1,755.10 |13.40% |1,762.30 |12.80% |

|South & Southeast Asia |1,510.90 |13.30% |1,747.10 |13.40% |1,746.60 |12.70% |

|Taiwan |2,063.00 |18.20% |2,385.70 |18.30% |2,418.80 |17.60% |

|Macau |416.8 |3.70% |449.9 |3.40% |532.4 |3.90% |

|Mainland China |3,206.50 |28.30% |3,785.90 |29.00% |4,448.60 |32.40% |

|TOTAL |11,328.30 |100% |13,059.50 |100% |13,725.30 |100% |

|　 |

|　 |2003 |2004 |2005 |

|　 |Amount |%Total |Amount |%Total |Amount |%Total |

|The Americas |925.9 |6.00% |1,399.60 |6.40% |1,565.30 |6.70% |

|Europe, Africa & Middle East |946.5 |6.10% |1,380.00 |6.30% |1,725.60 |7.40% |

|Australia, NZ & South Pacific |306.3 |2.00% |483.2 |2.20% |620.2 |2.70% |

|North Asia |1,235.30 |8.00% |1,665.40 |7.60% |1,853.30 |7.90% |

|South & Southeast Asia |1,359.60 |8.80% |2,077.70 |9.50% |2,413.00 |10.30% |

|Taiwan |1,852.40 |11.90% |2,074.80 |9.50% |2,130.60 |9.10% |

|Macau |443.6 |2.90% |484 |2.20% |510 |2.20% |

|Mainland China |8,467.20 |54.50% |12,245.90 |56.10% |12,541.40 |53.70% |

|TOTAL |15,536.80 |100% |21,810.60 |100% |23,359.40 |100% |

| | | | | | | |

Source: Tourism Research Hong Kong Tourism Board

Exhibit 3 – Detailed Tactics of HKTB’s 2006 Strategies

Exhibit 4 – Major Attractions and Spending Patterns

Major Attractions

The 5 most frequently visited places have been fairly stable for the past decades before 2005; it is almost certain that Hong Kong Disneyland would be one of 5 places from 2006 onwards.

|Ranking in 2004 |Places Visited |% of Visitors |

|(2003) | | |

|1 (1) |Victoria Peak |39 |

|2 (2) |Open-air Markets |31 |

|3 (4) |Ocean Park |23 |

|4 (3) |HK Convention and Exhibition Centre |21 |

|5 (5) |Repulse Bay |20 |

|Source: A Statistical Review of Hong Kong Tourism 2004 |

Other major attractions to beautify the Hong Kong Victoria Harbour as well as provide more visiting areas in Tsim Sha Tsui, the tourist city:

o A Symphony of Lights with Pyrotechnic between 8:00 to 8:18 pm

o Avenue of Stars

o Tsim Sha Tsui Waterfront Promenade

o Former Marine Headquarter Conversion to Hotel

o Ngong Ping 360

o Hong Kong Wetland Park

o AsiaWorld Expo

Spending Patterns

|  |2001 |2002 |2003 |2004 |2005 |

|Total no. of visitors |13,725,332 |16,566,382 |15536839 |21810630 |23,359,417 |

| |(+5.1%) |(+20.7%) |(-6.2%) |(+40.4%) |(+7.1%) |

|Business travelers |NA |3,437,113 |2,975,773 |3,407,055 |3,571,853 |

| | | |(-13.4%) |(+14.5%) |(+4.8%) |

|Overnight visitor per |4588 |4837 |5041 |4478 |4557 |

|capita spending (HK$) |(-0.5%) |(+5.4%) |(+4.2%) |(-11.2%) |(+4.1%) |

|Overnight business |NA |NA |US$5,803 |5472 (-5.7%) |6078 (+11.1%) |

|visitor per capita | | | | | |

|spending (HK$) | | | | | |

|Major spending items |NA |

|Threats |Weaknesses |

|Wealthy mainlanders head for more distant destinations including |Air pollution |

|Europe, Japan, South Korea after their first Hong Kong visit. |High price in comparison with neighbouring Mainland cities. Mainland visitors|

|Infrastructure capacity reaches the limit. The phenomenon is |may stay overnight in Shenzhen and pay day visits to Hong Kong to avoid |

|obvious in Chinese long holidays, e.g., 1 May, and 1 October. |expensive accommodation cost. |

|Congestion scene at the entrance of theme park scares away |Growing number of direct flights to Mainland cities will dilute Hong Kong’s |

|potential tourists. Average hotel occupancy reaches 88% in 2004. |position as the China’s gateway. |

|Spending per capita is dropping. Excluding the year of 2003 with |The university programs for tourist specialists are in preliminary stage. |

|data affected by SARS, the spending per capita drops from $5,000 |Qualification of practitioners including travel agents may not cope with the |

|in late 90s to $4,500 in 2004. While the average stay keeps in |demanding market. |

|the range of 3.5 – 4 days, the drop may attribute to the high |Cultural heritage is not maintained or viewed as worth preserving. |

|percentage of Mainland visitors with relatively low expenditure |Most busy Hong Kong people are not hospitable. |

|in comparison with Westerners. |Quality of service, even in those accredited qualified retail outlets and |

| |restaurants, is not high. It discourages tourists to return and to spreading |

| |the word about Hong Kong to their friends. |

Exhibit 5.2 – Porter’s 5 Forces Analysis

1. Threat of entry to the market from other organizations

• Country identity is key to attractiveness to travellers, and takes years to build. Hong Kong has spent millions of dollars in promoting itself as a city for shopping, dining, cultural heritage and exotic lifestyle that fit different needs of different traveller types. However, provincial governments in China also started to recognize the importance of tourism and its revenue potential thus strengthening its facilitation for the tourist industry. Most mainland cities have its own distinct “Chinese” characteristics, either in terms of culture or landscape. For these reasons China is a very strong complement city to visit as well as a competitor for Hong Kong.

• China, other than other Asian countries, as the new entrants to the scene would be able to attract also Hong Kong people due to proximity and lower cost of travel. A lot of people spend the weekend in China, as crossing the border is made much easier.

• On the other hand, for premium travellers, their expectations may be different. Business activities are reasons for business travellers. While HK remains a business and aviation hub, it will continue to attract business travellers who expect more professional services.

2. Supplier power

• Hong Kong’s service level has improved a lot in the past few years and tourists find us more helpful and courteous. However, the continual shortage of talent in the service industry, especially in the hotel industry poses a real threat, as tourists expect a memorable and amicable experience. Inexperienced service providers will leave a bad impression that could not be lifted easily.

• Hong Kong is still very much a shopping paradise. Though now international brands are available everywhere, Hong Kong’s price range remains attractive. For China tourists, HK represents authenticity.

• Dining, the variety of European, Chinese and Asian cuisines continues to be a major attraction. The sanitary conditions of dining are of major concerns to a majority of travellers; therefore the standard has been kept at a relatively satisfactory level.

• On the other hand, it’s culture heritage of east meets west are fading as a result of the government’s positioning as just another China city.

3. Buyer power

• As the world becomes more globalised and more countries competing for tourism revenue, customer’s choices are much more intensive.

• The world trend towards individual travelling and the easy access from the web also makes travelling easy.

• There are all sorts of travels packages or special types of travel (Spa, golf, fine dining etc) are readily available and the customers are ready to choose.

4. Availability of substitute products

• Every country is competing for tourist revenue and Hong Kong did not have much special resource; if its brand does not get strengthened, it will lose travellers to other places.

5. Existing Competitors

• Nearly all Asian countries have tourism as a major source of income; most of them are competing.

• Lately Macau has been one of the key competitors attracting mainland tourists.

• Mainland China may be more valued by western travellers as it offers more features and richer experience of traditional Chinese culture.

Reference

A Statistical Review of Hong Kong Tourism 2004, Hong Kong Tourism Board, The Government of Hong Kong SAR

Hong Kong Tourism Industry. First Quarter Economic Report 2005. Census and Statistics Department, The Government of Hong Kong SAR.

Keng, Au Keng. Assessing Macro Environment Trends in Singapore: Implications for Tourism Marketers

Mak, James, 2004, Tourism and the Economy – Understanding Economies of Tourism, University of Hawaii Press

Novelli, Marina, 2005, Niche Tourism – Contemporary Issues at Trends and Cases

Singh, Amrik. Asia Pacific Tourism Industry: Current Trends and Future Outlook

The Four Pillar Industries in the Hong Kong Economy. Hong Kong Monthly Digest of Statistics, December 2003.

Tourism Performance, Tourism Commission, Economic Development and Labour Bureau, The Government of Hong Kong SAR (.hk)

UNWTO News, Quarterly Magazine of the World Tourism Organisation, Year XX, Issue 1/2006

Wahab, Salah and Cooper, Chris. Tourism in the Age of Globalisation. Routledge: New York.

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[1] Niche Tourism – contemporary issues, trends and cases – edited by Marina Novelli, 2005

[2] Tourism and the Economy – understanding the economics of tourism – James Mak , pg.8

[3] Niche Tourism – contemporary issues, trends and cases – edited by Marina Novelli, 2005

[4] Niche Tourism – contemporary issues, trends and cases – edited by Marina Novelli, 2005

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Mega Events throughout the year

o International Chinese New Year Night Parade 29 January 2006

o Culture and Heritage Celebration 20April – 7 May 2006

▪ Showcasing 4 culture festivals

✓ Birthday of Tin Hau

✓ Birthday of Lord Buddha

✓ Cheung Chau Bun Festival

✓ Birthday of Tam King

▪ Temple Fair

o Hong Kong Shopping Festival 24-June – 31 August 2006

o Mid-Autumn Celebration 30 Setptember – 15 October 2006

▪ Lantern Wonderland

▪ Enhanced Fire Dragon Dance

o Hong Kong WinterFest 24 November – 1 January 2007

Discovery Hong Kong Year (DHKY) Enhancements

o Expand Quality Tourism

o Services Scheme

o Enhance Cultural Kaleidoscope Programme

o Enhance Cultural Kaleidoscope programme

o Repackage a “Nature Kaleidoscope”

o “Moments of >BHIYZT U W X ` è Y[^prs‡ˆ‰Š¦§øðçðçãÓɯžã¯—¯—ãŽã„~„ncZchgDÊmHnHu[pic]hgDÊ0J mHnHu[pic]-jhgDÊ0J U[pic]mHnHu[pic]hgDÊCJ

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