Hong Kong's Hotel Industry

Abstract

Hong Kong's tourism industry collapsed around July 1997, shortly after the hand over to Chinese rule. When the Asian financial crisis hit, Hong Kong's investments in neighboring countries suffered. Thereafter the Heng Seng Index dropped 55 percent. Throughout the last quarter of 1997 Hong Kong's economic indicators—unemployment, business failures, and negative GDP—all pointed to a recession. Among Hong Kong's hotels, more than 1,750 jobs were lost from December 1997 to March 1998, and average room rates dropped below 1991 levels. Hong Kong's tourism crisis can be traced to: an imbalance between room supply and demand (caused by the inflated demand for office space), unfair hotel pricing to take advantage of Japanese tourists, ineffective national promotional campaigns, airline woes, and food-borne illnesses that scared away visitors. Economic recovery is likely to take several years, and is dependent on the recovery of the rest of the region's countries. In June 1998 Hong Kong produced an economic-stimulus package to stem the tide of decreasing land values and stimulate the money supply. Hoteliers can help by working together to ensure pricing stability. Coordination is also needed between the Hong Kong Tourist Association and the rest of the industry to set goals and objectives. Hospitality education and training need to focus on the current needs of the industry and on how to compete in the new market.