Economic Analysis of the Tourism Industry in Hong Kong

Economic Analysis of the Tourism Industry in Hong Kong

Executive Summary

Tourism is a crucial industry for Hong Kong. The Government has worked

together with industry players to enable Hong Kong to preserve its

competitive edge as one of the most popular tourist destinations and

venue for hosting international conferences. This includes developing

multi-faceted tourist attractions, relaxing of controls over entry of

visitors and upgrading service quality and standards in Hong Kong.

Despite the worldwide economic downturn, this industry has not been

adversely affected and continued to record an increasing number of

tourist arrivals in the last 5 years.

This report will analyse the general business and economic environment

of the tourism industry in Hong Kong, evaluate and make

recommendations as to the investment potential of this industry. This

analysis was undertaken by the consultancy team of Professional

Company Limited at the request of Investor Company Limited in October

2002.

TaBLE OF Conents

Introduction................................................................................................................................................................

5

Scope and

Methodology.......................................................................................................................................

5

Discussion and

Analysis........................................................................................................................................

6

Nature and Outline of the Tourism Industry.....................................................................................

6

The General Business and Economic Environment...........................................................................

6

Overall Market Trends.....................................................................................................................................

7

Trends in prices.......................................................................................................................................................

8

Trends in firm numbers......................................................................................................................................

9

Trends in employment......................................................................................................................................

10

Trends in investment and profitability...............................................................................................

10

Key determinants that affect changes in demand and supply and the

magnitude of its elasticity 12

Key Determinants of Demand......................................................................................................................

12

Key Determinants of Supply..........................................................................................................................

14

Price Elasticity of Demand and Supply..................................................................................................

16

Pricing strategies and interaction between

firms........................................................................

17

Nature of costs and Impact of technology

changes...................................................................

18

Nature and Impact of Government Regulation of Travel

Industry..................................... 20

Fiscal Policy............................................................................................................................................................

20

Government Intervention and Regulation.........................................................................................

21

Government Support..........................................................................................................................................

22

Conclusion..................................................................................................................................................................

22