Hong Kong’s Tourism Industry
Industry Analysis
Industries according to Proctor (2000) have life cycles. Industries, like products progress through their life cycles and as they do so the nature of competition and consumer demand changes. The tourism industry is Hong Kong can be considered as a maturing industry. The tourism industry has experienced rapid growth in the last years. The competition is becoming more fierce as more and more competitors are aiming to attract the market. Price cutting, new forms of promotional activity, new additional services and other innovative strategies are being employed in order to gain sustainable competitive advantage.
The tourism industry is considered as one of the biggest and most profitable industries in Hong Kong. Every year, the New York of Asia is visited by millions of tourists from all over the globe especially from neighboring countries in Asia. In the year 2007 alone, Hong Kong recoded 28.17 million of visitor arrivals. There was an increase of 11.6 per cent capered with the year 2006. Majority of the visitors to Hong Kong come from Europe, Australia and New Zealand and Mainland China. Mainland China is the major market in Hong Kong tourism. In 2007, there were recorded 15.49 million of visit arrivals. The tourism industry in Hong Kong is expected to continue to flourish as new tourist attractions were completed. Among these are Hong Kong Disneyland, A Symphony of Lights Phase II, Hong Kong Wetland Park and Ngong Ping 360. The Hong Kong Tourism Board is also active in its campaign to promote Hong Kong worldwide (Hong Kong Tourism 2008).
PESTLE Analysis
Political
The Basic Law establishes unique arrangements for the government and political development of Hong Kong. It promises to preserve Hong Kong’s way of life and capitalist system for fifty years and to give the territory a high degree of autonomy consistent with the ‘one country, two systems’ principle. It provides for independent executive, legislative and judicial powers. The only policy areas over which Beijing exercises direct control are foreign affairs and defense. Hong Kong has considerable autonomy in international relations, particularly in the economic sphere.
Economic
One of the biggest economic endeavors that Hong Kong made was the establishment of Hong Kong Disneyland as a result of the agreement between Hong Kong and Walt Disney Company. Hong Kong Disneyland has caused numerous benefits to the Tourism industry and is now one of the major attractions in Hong Kong. Hong Kong’s Chief Executive Tung Chee Hwa said that Hong Kong Disneyland will ensure that Hong Kong becomes the favorite tourist destination in Asia. It will also strengthen Hong Kong’s status as a world city. Lastly, Hong Kong Disneyland together with other economic initiative will ensure that Hong Kong’s economic recovery and growth are sustained.
Another major economic decision of Hong Kong and China is to cooperate with each other through the Closer Economic Partnership Arrangement (CEPA). CEPA covers three broad areas – trade in goods, trade in services and trade in investment facilitation. Under CEPA, Hong Kong’s domestic exports to China will be tariff free. Manufactured products from Hong Kong will also be shipped to China tariff free (Ramsay 2003). Part of the CEPA is the agreement between China and Hong Kong to cooperate in tourism. In order to further promote the development of the tourism industry of Hong Kong, the government of China allows residents in Guangdong Province to visit Hong Kong individually. Hong Kong and China are also cooperating to strengthen their tourism promotion. Hong Kong and China are also seeking to raise the service standards of their tourism industries.
Hong Kong is a major international and regional financial center and considered as one the most liberalized economies of the world. It is the world’s 11th largest trading economy, a major international banking center and the base for the regions most important corporate headquarters. It is a major provider of service to China and the East Asian region. Hong Kong’s economic prospects now depend almost entirely on its link with China and its role as a trading and services center for the People’s Republic of China and as a financial center for the southern China region.
Social
About 98 per cent of the Hong Kong population are Chinese in origin. In this demographic sense, Hong Kong is essentially a Chinese society. Most of the Chinese people, especially the adults, were immigrants from China. They have carried with them the cultural tradition from various parts of China, especially the Guangdong Province. About 90 per cent of the Hong Kong Chinese are Cantonese. Despite the fact that most Hong Kong residents are trace their origin in China, saying that Hong Kong is an entirely Chinese society is not a universal truth. The fact that Hong Kong was under the British rule for almost 150 years cannot be discounted. It is the British who have provided the administrative framework within which the Chinese conduct their daily lives and make their living. Aside from this, Hong Kong finds itself caught itself in the crossroad of change. Hong Kong has experienced rapid economic growth and urbanization making it one of the most modernized societies in Asia. Hong Kong residents were also exposed to cultural influences from other parts of the world, particularly the West. Hong Kong society is then a society based on a Chinese heritage that has evolved and transformed because of different cultural influences from the West (Chan and Lee 1995).
Technological
Through the opening of Hong Kong Disneyland, Hong Kong has become a premiere destination in Asia. The government of Hong Kong is committed to making Hong Kong an attractive tourist destination. The government is developing new tourist attractions and is enhancing existing facilities. The cable car system in Hong Kong is undergoing development in order to provide new attractions and experience to the tourists (Hong Kong: Travel and Tourism 2004). The government is also developing major tourism infrastructure in Hong Kong such as Hong Kong Disneyland, the Asia World Expo, the Wetland Par and the Ngong Ping 360. The government is also developing a world-class terminal in Kai Tak in order to keep up with the increasing popularity of cruise travel.
The rapid development and wide adoption of digital technology in Hong Kong has lead to great changes in the hospitality and tourism industry. Because of the advancements in technology, physical distance has lesser effect on tourists. Telecommunications and transportation become more efficient and less expensive. Distance is bridged even further using the Internet. Technology allows tourists to book hotel accommodations and air tickets online. Electronic brochures are now widely used in the promotion of trade fairs and travel products.
Legal
In order to make Hong Kong more accessible to tourists, especially those coming from mainland China, a range of policies and measures were introduced in 2002. In January 2002, the quota of the Hong Kong Tour Group Scheme for mainland tourists was abolished. Travel agencies organizing tours from mainland China to Hong Kong has also increased in number. Tourists from about 170 countries are allowed to visit Hong Kong visa free for seven days to 180 days. In 2003, the Individual Visit Scheme (IVS) was introduced and included major cities in China such as Beijing, Shanghai, and Tianjian. Because of the IVS the number of tourists that travelled from China to Hong Kong has increased significantly.
Environmental
In order to promote responsibility in natural and cultural environments, the government focuses on the delivery of an ecotourism development plan and ensures that the procedures and guidelines for planned and sustainable tourism expansion are incorporated in the Hong Kong tourism strategy. The government also ensures that the socio-economic, cultural and environmental benefits of tourism are spread equitably across the population. Sustainable tourism is promoted in order to preserve nature and cultural heritage while at the same time benefiting the population.
Hong Kong Tourism Outlook
Positive Outlook
The current intense competition between Hong Kong and its neighboring countries is expected to get even more fierce. Because of the threats posed by its neighboring countries, Hong Kong may lost its reputation as the shopping capital of Asia. Other countries are also developing their tourism industries in order to attract more visitors. One of the biggest threat to Hong Kong tourism is China. There have been a rapid growth of the Chinese economy and the government is intensifying its campaign to promote China as the top tourist destination in Asia. Other countries that are becoming more of a threat to Hong Kong are Singapore, Malaysia, Philippines, Thailand and Indonesia. However, if Hong Kong will play its cards right, it can benefit from its competitors. For example, Hong Kong can take advantage of the growing popularity of mainland China. China is expected to become the world’s largest tourist destination in 2020. Hong Kong can develop joint tourism resorts and attractions and market these products with mainland China together (Song 2006).
The major visitors to Hong Kong will still come from mainland China. In order for Hong Kong to sustain its current position as one of the top destinations of the mainland tourists, Hong Kong must maintain its heritage as a former colony to differentiate from other Mainland cities for incoming tourists while deepening its economic relationship with the mainland. Hong Kong will continue to attract business visitors particularly those that came from China. The speeding up of China;s convergence with the world through its World Trade Organization entry and the drive towards closer co-operation between Hong Kong and the Pearl River Delta would over time be a key source of business visitors from the Mainland to Hong Kong (Hang Seng Bank 2003).
The economic expansion of many Asian countries and the continuous increase in intra-Asian travel will also benefit Hong Kong tourism. The positive economic conditions in Asia’s traditional industrial tigers – Singapore, Hong Kong, Taiwan and South Korea – will continue to contribute to the growth of tourism in the region. The populations of these countries are reaping the fruits of economic prosperity by pursuing more leisure activities including travel. Continued economic vitality in the tourism sectors of developing countries is contingent on improving not only the infrastructural facilities but also management practice. This enhancement will ensure the contribution of the international tourism industry to their long-term growth and economic diversification (Tse 2001). The continued popularity of Hong Kong Disneyland will also contribute to the growth of tourism in Hong Kong. Hong Kong will be the top family destination in Asia.
Negative Outlook
Hong Kong faces challenges from China, as it poses as a threat to Hong Kong’s economy and in areas such as tourism. Hong Kong must deal with competition posed by China in areas traditionally dominated by Hong Kong like shipping, property and finance. China is also becoming a major tourist destination in Asia (Asian Outloook 2002). The tourism industry will also suffer form the cyclical worldwide economic slowdown and the internal issues that it faces, particularly in the political sphere. Hong Kong will also be affected by the opening up of the Chinese market and the prosperity that the Pearls River Delta is experiencing. Pollution is also seen as a major challenge for Hong Kong in the future. Tourism will be hampered by the reputation of Hong Kong for air pollution. Pollutants come mainly from motor vehicles, industry, and power plants in Hong Kong. Another long-term challenge is the aging population. In order for the economy to continue to grow, Hong Kong must maintain its human resources. The aging of the workforce in Hong Kong will have a negative impact on service-oriented industries such as tourism. Hong Kong will also face challenges in the course of enhancing its international status and strengthening its role in external affairs.
The openness of Hong Kong will cause challenges in the future. These challenges include being vulnerable to non-traditional security threats. Infectious diseases, money laundering, illegal migration, financial crisis, ecological security and food safety will also affect tourism in Hong Kong. The political sphere resulting from Hong Kong’s integration to China will also be problematic, as Hong Kong will find it difficult to avoid being dragged in international disputes. For example, debates over issues such as the rule of law, human rights and constitutional development will attract adverse comments from the West. These negative comments and views from the West will affect the reputation of Hong Kong. As an international city, Hong Kong is still lagging behind other international cities in promoting and showcasing local cultural characteristics, leading consumption trends, drive for creativity and development of arts and cultural activities (Commission on Strategic Development Executive Committee). If Hong Kong will not commit itself to these areas, adverse effects on Tourism is expected
The tourism industry will face both opportunities and challenges. Among the leading challenges of Hong Kong tourism is the growing competition and the strengthening of other Asian competitors. Among the biggest threat to the tourism industry in Hong Kong is the growing tourism in mainland China. Also, the integration to China presents challenges especially in the political environment. Although there are numerous challenges that the tourism industry is facing, I thing the industry will continue to grow. With challenges come opportunities. Hong Kong can develop a partnership with its competitors in order to promote Asia as a top destination. Hong Kong can also engage in a joint marketing campaigns with China. The largest market for Hong Kong tourism still comes from mainland China. In order to reap the benefits of the integration to China, Hong Kong must build strong partnership with mainland China.
References
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Hong Kong’s Positioning in the Internal Community and External Affairs (2006). Commission on Strategic Development Executive Committee. Retrieved April 28, 2008, from http://www.cpu.gov.hk/english/documents/csd/csd_ec_5_2006.pdf
Hong Kong Tourism (2008). Hong Kong Tourism Board. Retrieved April 28, 2008, from
http://www.gov.hk/en/about/abouthk/factsheets/docs/tourism.pdf
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http://www.doir.wa.gov.au/documents/Hong_Kong_Market_Fact_Sheet(3).pdf
Proctor, T. (2000). Strategic Marketing: An Introduction. London: Routledge.
Ramsay, R. (2003). Hong Kong Bouncing Back. Business Asia, 11(10), 11.
Repositioning Hong Kong to Capture the Tourist Boom (2003). Retrieved April 28, 2008 from http://www.cuhk.edu.hk/cpr/pressrelease/030328e-4.htm
Song, H. (2006). Tourism Demand in Hong Kong: The Current Status and Future Trends. PPRI. Retrieved April 28, 2008 from http://www.polyu.edu.hk/ppri/3/Documents/Tourism_Demand.pdf
The Changing Face of Tourism in Hong Kong (2003). Hang Seng Bank. Retrieved April 28, 2008 from http://www.hangseng.com/hsb/eng/abo/pr/a012903.pdf
Tourism Infrastructure, facilities and Products (2004). Hong Kong Tourism Board. Retrieved April 28, 2008, from http://www.yearbook.gov.hk/2004/en/15_02.htm
Tse, R. Y. C. (2001). Estimating the Impact of Economic Factors on Tourism: Evidence from Hong Kong. Tourism Economics, 7 (3), 277-293.
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