Hong Kong frets over how to keep the tourists coming

By Susan Fenton

HONG KONG (Reuters) - After a disappointing end to 2006, Hong Kong will be hoping this month's Lunar New Year holidays generate a pick-up in the territory's tourist trade.



Annual visitor arrivals totalling 25 million have nearly doubled from five years ago but in the past few months growth has slowed sharply. Arrivals from mainland China, who make up more than half of all tourists, dropped in October and November from a year earlier before recovering in December.

On a fine winter afternoon, the atmosphere at Hong Kong Disneyland -- which opened to much fanfare in 2005 and has been a major draw for mainland visitors -- is subdued.

Tourists ambling through the turnstiles are in no rush: queues for the Jungle River Cruise and other attractions are light and the Main Street Corner Cafe is half-empty.

If a three-year tourist boom is over, analysts say, the territory needs to reflect on how it can maintain visitor numbers over the longer term so that tourism can continue to generate 6-8 percent of gross domestic product.

"It's a worry. Tourism is still growing but it's slowing somewhat due to extra competition from other destinations," said Tai Hui, an economist at Standard Chartered Bank. "That begs the question: do we want to keep attracting shoppers? We need to diversify."

The slowdown in Hong Kong contrasts with a 17 percent surge in arrivals last year in neighbouring Macau, which has overtaken Las Vegas as the world's most lucrative gambling resort.

While Macau has attracted foreign casino operators, including Las Vegas Sands and Wynn Resorts, which are drawing mainland Chinese and other tourists back again and again, Hong Kong's attractions don't appear to have the same allure.

At Disneyland Toshihito Takamatsu, a 26-year-old businessman from Japan, is bored after an hour-and-a-half.

"I thought it would be much bigger. It's disappointing," he said.

The Hong Kong Tourism Board maintains that Hong Kong will benefit from Macau's boom. But Takamatsu says he will give the territory a miss next time he visits southern China.

"I'll visit Macau again in a few months and go to the casinos, but not Hong Kong," he said. "Macau is much more exciting for men."

WRONG APPROACH

Certainly as a shopping destination the territory remains attractive for the likes of Fanny Liu, a 28-year-old sales manager for an American computer company in Shanghai.

"The quality of shopping is very good. Cosmetics and designer goods are much cheaper than in Shanghai," said Liu, who spent HK$600 a day during a four-day visit to Hong Kong, her first.

Mainlanders have flocked to the territory since Beijing began allowing individual visits -- as opposed to group tours -- in 2003, helping boost annual spending by tourists to HK$117 billion (7.6 billion pounds) in 2006 from HK$77 billion in 2002.

But hopes they would make repeat shopping trips may have been optimistic.

Liu says she would like to visit again but, with just four weeks' holiday a year, she would rather go to Europe next time.

Government advisers, in a review of economic policy last month, said more tourist attractions were needed to ensure further growth.

Analysts say that is the wrong approach.

"We are not going to see such rapid growth in visitors in future. The focus should be on translating the existing huge customer base into more economic activity," said Paul Tang, senior economist at Bank of East Asia.

The territory should be positioning itself as a medical services centre, as Singapore and Bangkok have done, he said.

But Hong Kong is currently turning away mainland Chinese women coming to give birth here because of complaints they are taking hospital beds from locals.

"This is an opportunity, not a problem. We should be building more hospitals," Tang said.

Meanwhile, Macau's success is raising the question of whether Hong Kong should also embrace gambling. Arch rival Singapore plans to open its first casino in 2009 and a second in 2010. Lawmakers in Japan are also considering lifting a ban on casinos.

James Tien, chairman of the largely pro-government Liberal Party, put a motion to the Legislative Council late last year proposing construction of a casino and resort complex on Lantau Island. The project, he says, would create 2,000 to 3,000 much-needed, low-skilled jobs and bring in HK$5 billion a year.

His proposal was shot down, with the government arguing that gambling would encourage addiction and other social problems.

Tien disagrees.

"I don't think people would lose their shirts. They are sensible and they have already got horse racing and soccer betting," he said.

He believes government opposition is really based on an unspoken agreement with Beijing that gambling is Macau's preserve. Public support for casinos is growing, however: a survey by the Liberal Party showed half of more than 1,000 respondents were in favour of opening one.

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