The bigger problem in the tourism industry

December 18, 2019 15:41
The damage caused by the current  unrest to the tourism industry is no worse than the impact of the SARS outbreak in 2003. Photo: Bloomberg

The months-long unrest in Hong Kong has had a very serious impact on the tourism sector. Surely, not too many people would like to visit a place wracked by violent protests.

But how bad would be the damage and how long would it last? This is important for the industry as entrepreneurs need to decide whether to stay on or close their business.

Let's take a look at the historical data of Hong Kong's monthly visitor arrivals dating back to 1970. On the logarithmic scale, it has been linear: the growth of visitors has been stable over the decades.

Many agree with the official assessment that the damage from the current turmoil is worse than that of the SARS outbreak in 2003.

However, even though the latest arrival figures show a sharp fall, the drop is no worse than during the SARS outbreak, according to the actual data.

Historically, such sharp falls didn’t last. So this time around, a recovery could be expected soon, just like what happened after the city emerged from the SARS outbreak.

In fact, one-off sharp plunges are often not as detrimental as feared.

But the flattening growth trend since the Occupy Movement in 2014 could prove much more disturbing over the long run.

This should be the focus of discussion at least among industry participants.

Why is there such a change? A reasonable conjecture is that Hong Kong has been relying too much on mainland visitors in the past decade or so.

As the renminbi peaked in 2014, the Hong Kong dollar became relatively expensive and the incentive for mainlanders to shop here reduced. Slowing growth in China may have also brought a negative impact to the industries.

Years ago, when the industry made easy money from mainland visitors, operators had not thought of such a situation, and had not spared enough effort to broaden our sources of visitors.

Now that the dire consequences of the unrest are surfacing, who should be blamed for such short-sightedness?

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Hong Kong SAR Government

The author is Adjunct Professor in the Department of Economics and Finance, City University of Hong Kong and previously the chief economist of a bank. (facebook.com/kachung.law.988, [email protected])