This year’s Golden Week holiday is quite different from the ones we’ve seen before. Arrivals registered a single-digit growth during the period, the first time it was this slow since the start of the Individual Visitors Scheme (IVS).
Occupy Central definitely has had a detrimental effect on arrivals, but the impact is expected to ease as the situation improves. Yet, there are more fundamental issues related to tourism development that we cannot take lightly.
Tourism has been identified as one of Hong Kong’s key economic pillars. There is no doubt that its development has contributed its share in our overall GDP growth. In 2013, Hong Kong received over 54 million arrivals with a year-on-year growth of 11.7 percent. In terms of economic benefits, spending by inbound tourists exceeded HK$340 billion, up 15.7 percent from 2012.
Although there is some turbulence in the first half of 2014, Hong Kong still registered a double-digit growth in terms of arrivals. While the picture seems to be rosy, we cannot be optimistic. The future is full of obstacles, some of which are fundamental issues that seriously hinder the industry’s development.
First and foremost is the issue of capacity. The implementation of the IVS and Multiple IVS for mainlanders has triggered a period of rapid growth in terms of arrival numbers. However, the development of basic tourism infrastructure has been unable to cope with the demand.
The lack of new infrastructure, along with the aging of existing ones, is pushing current operations to the limit. The shortage of accommodations has driven up room rates and affected the destination’s price competitiveness. Crowdedness is becoming a public concern. It does not merely affect the visitors’ satisfaction but induces confrontations between visitors and local residents.
The capacity issue is a reflection of a perhaps more critical barrier, which is the absence of an effective tourism governance mechanism.
Most modern designs feature an independent bureau or a cross-ministerial body responsible for the planning, building and management of infrastructure, promotion of the destination, and the management of tourism impacts, whether in terms of costs or benefits. Hong Kong has three bodies — the Hong Kong Tourism Commission (HKTC), the Hong Kong Tourism Board (HKTB) and the Travel Industry Council of Hong Kong (TICHK) — sharing roles and responsibilities.
The HKTC is a civil organization coordinating and serving as a gatekeeper to oversee the various bodies including HKTB. It consists mainly of civil servants who are not specifically trained for tourism. They also lack long-term commitment to the sector. The commissioner and the senior team members have a specific term of service in the organization. But by the time they have acquired a certain level of proficiency in the job and established a network in the sector, they are posted to other departments.
The HKTB is the promotional arm. Unfortunately, their definition of promotion is rather narrow. Their key performance indicators are largely associated with visitations, length of stay and spending. Whether tourism benefits residents has not received adequate attention.
Mainland visitors under the IVS and Multiple IVS have received quite a lot of media attention these past few years. Overreliance on a single market is risky in the long term. If we take a closer look at the composition of arrivals in the past five years, we will easily realize that Hong Kong’s arrival growth is relying solely on mainlanders. Other important short-haul markets are losing out their shares. The high-yield long-haul markets are either stagnant or showing negative growth.
Furthermore, the influx of mainlanders has driven up retail prices, exhausted supplies of certain daily necessities, enhanced crowdedness, and thus induced anti-mainlander sentiments among the locals. Retail rentals have soared, undermining the profitability of certain retail businesses and dealing a blow to retail diversity. The daily lives of local people have been seriously affected.
Besides, Hong Kong is an open economy which relies heavily on importation of the goods. When a retail store sells a product, foreign suppliers enjoy most of the revenue. That means, the multiplier effect of tourist spending on Hong Kong’s economy is small.
Without the support of a clear and effective set of policies to support the development of the local economy, the benefits of tourism to Hong Kong would remain minimal. The blind pursuit of volume growth has to be regulated.
It is, however, important to point out that the mainland’s geographical and cultural proximity as well as its sustained economic growth, along with the improvement of transport facilities, would only further boost arrival numbers. In view of the “one country” principle, it would be difficult and undesirable to control cross-border traffic. Whether the border would last for long is another question. It is, therefore, critical for us to prepare for the continuing growth in volume and to build a mechanism that will help minimize the negative effects and maximize the benefits for the people.
We need a clearly defined set of objectives for tourism as well as a strategy to map out its development. Right now, our system for tourism marketing and management remains volume-oriented. The industry simply aims for growth in arrival numbers without adopting a mechanism to gauge its benefits to the community.
We have to bear in mind that development has a deeper meaning than mere growth. Ultimately, tourism must redound to the benefit of the people and enhance the well-being of the community. Anything else does not count.
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