It is time to get smart about where our advertising money is spent,
writes DAVID O'REAR

The decision by the World Health Organization to lift its travel advisory on Hong Kong and Guangdong is exactly the shot-in-the-arm our economy needs. It might take a few more weeks, but we are getting back to business as usual. Next, we need to minimize the delays in bringing back our friends from abroad.

To minimize the lag time between the WHO's "all clear" signal and a return to profitability and renewed record-high employment, it is important that the message that Hong Kong is back in business be heard around the world. To this end, the government's decision to hire a public relations consultancy, to advise on the re-launch campaign, is a wise one. While PR firms always want longer lead times and larger budgets, the fact remains that -- barring any relapse -- the recovery is underway. Now, the challenge is to make the most of it.

Data released by the Hong Kong Tourism Board show first quarter visitor arrivals were up 19.7 percent year-on-year in January-March, but a 69 percent drop in April turned the four-month rise into a 19.3 percent drop. In Q-1, mainland travelers provided all of the increase, and then some: without arrivals from the rest of China, total visits would have declined. Obviously the second quarter will be down sharply, but a look at who our visitors are, and what they spend their money on might help in planning the tourism recovery campaign.

Because of the increasing efficiency of onward travel, the share of visitors remaining in Hong Kong overnight declined in the first quarter, from 65.6 percent to 64.8 percent, or by about 2.5 percent. This is most clearly illustrated with those coming from Taiwan, only 24.7 percent of whom remain as our guests for more than a few hours, down 15 percent from the same period last year. As a rough estimate, every hour reduction in the annual average time visitors spend in Hong Kong costs us about HK$180 million.

Taiwan and the rest of China are still, at this writing, working hard to contain the epidemic, and so we cannot expect a great surge in tourism from those critical sources. We have to look elsewhere, and get smart about the sources of revenue.

Taking the visitor numbers, and adjusting for 2001 data on purchases (the latest available) gives us an indication of who is spending how much on what, and where we should target in our publicity campaigns. While the visitor arrivals numbers are current to end-March 2003, spending patterns are from 2000 and 2001 data, and so must be treated with caution. Still, the implications are valid.

Based on the average cost of a hotel night (HK$593 in January-March this year, for all classes of hotels), the increased number of visitors in the first quarter earned us an extra HK$275 million, up 20.6 percent from a year earlier. If we adjust this for each nationality's likely number of days spent in the HKSAR, our earnings rise an additional HK$988 million, or 24.6 percent. If the share of visitors staying overnight had remained constant, our take would have been an additional HK$41 million on hotels alone.

The two graphs show the percent visitors from key markets spend on various purchases, and the average dollar spending. Below, we look at how these-and more detailed-figures should influence our recovery campaign.

In 2001, the best shoppers were visitors from Mainland China (spending HK$3,295 each), those from Latin America (HK$2,926) and arrivals from the Middle East (HK$2,760). Since it may still be premature to target the rest of China, it is tempting to think about what we can do to entice travelers from Latin America and the Middle East.

Yet, a publicity campaign in those markets highlighting shop bargains might only add an incremental amount to total visitor spending in shops. These potential visitors cannot be ignored, but neither are they likely to provide the biggest bang for our advertising bucks.

A quick comparison of average incomes versus spending shows there is a profit to be made targeting the Dutch (HK$797 per capita spending on shopping), French (HK$933) and Germans (HK$1,007). People in these three countries are fairly wealthy, and if we can raise the spending of those who have the money, but are not parting with it in our stores, the results will bring a smile to vendors around Hong Kong. As shopping accounts for half of all spending on the ground, this is an area that needs special, focused attention.

Visitors from the U.K. spend more on hotels -- an average HK$712 per visit -- and meals away from hotels (HK$797) than do arrivals from any other major location. Efforts to increase this particular type of spending among Brits may be futile, whereas up-grading hotel accommodations for Japanese, who spend just HK$500 on rooms, might yield lucrative results. Hotel accommodation makes up 26.1 percent of total spending, and here the Japanese and Koreans are well behind the level of other visitors of similar income levels. If visitors from North Asia could be persuaded to spend as much on hotels as do Singaporeans, our earnings would rise by more than HK$1.5 billion.

In the first quarter of this year, we hosted 4.9 percent more Koreans than Singaporeans. But, based on average spending in 2001, those travelers from down south were worth 62.9 percent more, per person, to our restaurateurs. Raising Korean restaurant spending to Singaporean levels would add HK$130 million to our economy. The point is not to dismiss Singaporeans, but rather to attract Koreans to spend more eating out.

The finer our analysis of the potential spending of each visitor, the better our ability to customize advertising campaigns to effectively re-launch our travel and tourism sector. Simply designing a logo and launching a homogenized ad blitz worldwide will not bring the results we need.