Hong Kong must focus more on boosting the consumption of locals to help the retail and tourism-related businesses amid a decline in mainland visitors to the city, says a prominent corporate executive.
According to Thomas Mehrmann, the outgoing chief executive of Ocean Park, the popular marine-themed tourist attraction in Hong Kong, the headwinds faced by the retail sector could persist for years.
“We are not yet halfway down the tunnel,” Mehrmann told the Hong Kong Economic Journal Monthly in a recent interview.
The situation is likely to get worse in the coming quarters, he said, citing factors such as an uncertain macro environment and adverse exchange-rate movements.
Given the challenges facing the retail and tourism sectors, there should be some reorientation in government policies as well as the business strategies of private firms, Mehrmann suggested.
The comments are not surprising in light of the grim data on Hong Kong’s visitor inflows.
According to government figures, the aggregate number of overnight visitors to Hong Kong was down 12.7 percent last year compared to 2014.
This has led to the city witnessing a 9.3 percent contraction in tourist spending in the year.
As the Hong Kong dollar is pegged to the US dollar, a slide in the value of the renminbi against the greenback also made China’s currency weaker again the Hong Kong unit.
This has discouraged some Chinese from traveling to Hong Kong, which was already suffering from the negative impact of anti-mainlander protests that took place in the city earlier.
A drop in visitor traffic at Ocean Park, which has for decades been a barometer of the fortunes of the local tourism sector, tells the story.
In 2015, the park drew 6.7 million visitors, a decline of 14 percent from the record 7.8 million people that it attracted in 2013.
The decline came as 30 percent fewer mainlanders passed through its gates last year.
As of now a rebound is still not in sight, with the first-quarter recording a double-digit decrease in overall attendance.
Worse still, there will be more competition from across the border in the future, including from Disney which is set to open a Shanghai facility later this month.
Mehrmann started his Ocean Park tenure in 2004, when both the park and the city were still reeling from the SARS epidemic. The park incurred a loss of HK$4.1 million during the 2002-03 financial year when visitor numbers were even as low as six on some worst days.
Along with the then chairman Allan Zeman, Mehrmann oversaw a smart rebound within just a year, helping the park book a profit of almost HK$100 million.
The park rose to new highs under Mehrmann’s leadership, enabling it to win top spots in many global amusement park rankings.
The main factor that paved way for the rebound was the individual visit scheme rolled out by China in July 2003 that brought tens of millions of mainland tourists and spenders to Hong Kong.
But now, there are fewer mainland patrons, a reality that is also confronting Ocean Park’s chief rival – Hong Kong Disneyland.
Disney’s theme park has swung into loss again, forcing it to plan some staff cuts.
Mehrmann says Ocean Park won’t follow suit.
Although cost control measures may be unavoidable, Ocean Park is still hiring people, he says.
“Disneyland employs almost 5,000 people in Hong Kong but our headcount is around 2,000. And we run 80 attractions in a much larger park,” says Mehrmann.
And, unlike the situation during the SARS period, Ocean Park now sits on ample cash reserve that is enough to cover operation costs for years.
When asked what he is most proud of about his tenure at Ocean Park, Mehrmann points to the park’s conservation efforts, saying the initiatives have saved some rare species from extinction.
Ocean Park is now the only overseas member of the US Association of Zoos and Aquariums.
Mehrmann will bid farewell to the park this July, wrapping up a 12-year tenure that started in the midst of a deep crisis.
While it may not be the best time to say goodbye as the park has been hit by another downturn, Mehrmann says he is confident that his successor and long-time deputy, Matthias Li Sing-chung, will lead the park to a bright future.
Ocean Park’s first hotel, a 495-room Marriott, will open next year and the planning of a second one is already underway. The Water World, an attraction that evokes fond memories among many older Hongkongers, will be brought back to life in 2018.
Projects finished in recent years have been built with a distinct local touch. An example is “Old Hong Kong”, an authentically recreated street that seeks to bring to mind the city’s life and culture during the 1950-70s.
MTR’s South Island Line, expected to be up and running before the end of the year, can also help shore up attendance figures at Ocean Park. The park is considering extending its hours so that Hongkongers, after a day of work, can relax and unwind there late in the evening.
The park will focus on “small things” to entertain Hongkongers, for whom it was built in the first place. A slew of discounts and special offers for locals are in the pipeline when the park celebrates its 40th anniversary later this year.
“If we can make well-traveled Hongkongers happy at a park of their own, then we can make people from anywhere else happy,” says Mehrmann.
Apart from promotions aimed at Hong Kong people and mainlanders, Ocean Park plans to step up promotional activities targeted at tourists from South Korea, Southeast Asia and India.
The road ahead
Mehrmann says he has become attached to Hong Kong after living in the city for more than a decade.
He says he won’t return to the United States after his Ocean park tenure but will instead set up a consulting firm Hong Kong that will provide advisory services to theme parks in Asia.
Also, he may remain as an advisor to Ocean Park.
“Asia will see an exponential increase in theme park business,” Mehrmann says, noting that “the size of middle class in China alone will reach 600 million in the next five years”.
That is the basis for confidence that the market will grow despite some bumps along the way.
“When Hong Kong Disneyland opened in 2005, many thought Ocean Park may soon close its doors, but we have outcompeted our rivals,” says Mehrmann.
Hong Kong shouldn’t fret too much about the Disney theme park in Shanghai, but must instead focus on getting locals to spend more, he says.
As for visitors, efforts should be devoted to draw in more high-end tourists who have real spending power.
This article appeared in the June issue of the Hong Kong Economic Journal Monthly.
Interview by Henry Sung and Joyce Lee
Translation by Frank Chen
[Chinese version 中文版]
– Contact us at [email protected]