Hong Kong visitor arrivals were driven by mainland Chinese visitors, while greater China faces a headwind.
HONG KONGHong Kong received more than 48 million visitors in the year 2012, including over 13 million visitors in quarter four alone, reflecting a 15.1% year-on-year (YOY) growth for the quarter.
This was mainly driven by a record 9.58 million visitor arrivals from mainland China, reflecting a 24.2% YOY increase. The significant growth is attributable to the National Day Golden Week in October, increased traffic from Shenzhen and a favourable exchange rate for the Renminbi.
The Thailand market recorded the second highest YOY growth of 20.2%, highlighting the country's quick recovery from the 2011 flooding. Among the top five source markets, South Korea and Taiwan recorded the strongest YOY growth rates in quarter four at 6.3% and 3.2%, respectively. Conversely, Hong
Kong recorded a 7.9% YOY decline in visitor arrivals from the USA market over the same period. In 2012, same-day and overnight visitors visiting Hong Kong for business/meetings from the Americas declined 7.2% and 4.2%, respectively. This decrease is likely due to layoffs in the financial services industry.
Visitor arrivals from Japan, the fifth-largest source market for Hong Kong, declined 26.7% YOY, negatively impacted by a territorial dispute about Diaoyu islands (also known as Senkaku islands in Japan) with China at the end of 2012. The India market also contracted by 17.6% YOY, in light of the decline in the number of connecting flights between India and Hong Kong, and a depreciation in the value of the rupee.
Similarly, other long-haul markets, such as Europe and Oceania, continued to record YOY declines, due to the unstable economic environment that prompted more conservative travel budgets.
The share of overnight visitor arrivals decreased only slightly YOY, from 53.2% in 2011 to 48.9% in 2012, because of a significant increase in sameday visitor arrivals. The increase is attributable to considerable growth in cross-border traffic, which in turn was facilitated by multiple-entry permits for Shenzhen residents. Hong Kong's further integration with China will continue to increase cross-border traffic, fuelling continued growth in the number of same-day visitors.
Furthermore, current pricing levels and a hotel supply shortage is creating unaccommodated demand, resulting in moderate growth for overnight visitors. Moreover, the Hong Kong Tourism Board introduced a new representative in Russia in mid-2012 and this promotional effort is expected to boost Russia.
Though Hong Kong's tourism market remains buoyant thanks to visitor arrivals from mainland China, the market continues to face uncertainty, particularly since a number of disputes between locals and mainland Chinese visitors over various social issues has been well publicised in mainland Chinese media. In addition, despite its limited land area, Hong Kong continues to receive more visitors than larger destinations such as Thailand, further stretching the territory's capacity limit.
These changes in the economic and socio-cultural environment put the quality of visitors' experience in Hong Kong at risk.
In particular, a shortage of affordable hotel rooms has caused a number of incidents and the tourism industry does not have an easy answer, pending forthcoming increases in supply. Politicians have chimed in on the debate, with a policy regulating the cross-border flow of visitors being proposed. However, at this stage, the introduction of such a policy is unlikely.
Read the full story HEREAbout the Authors
Daniel J. Voellm is Managing Director of HVS Hong Kong, has provided advice in major markets across Asia-Pacific. Prior to heading the Hong Kong office, Dan was Vice President at HVS' global headquarters in New York conducting a wide range of appraisals, market studies and underwriting due diligence services.
Dan brings a strong understanding of the hospitality industry to HVS. His experience in hotel and food and beverage operations in Germany, Switzerland, England and the United States is complemented by an Honours Bachelor of Science Degree from Ecole hôteličre de Lausanne in Switzerland. Dan works closely with key institutional and private owners of hotel properties, financiers, developers and investors. Dan further advises on property and concept development and strategy. 
Adriane Li is an Analyst at HVS Hong Kong, working primarily on hotel consulting assignments, including market studies and feasibility studies in the Asia-Pacific region. Graduating with a Bachelor of Science (Honours) degree in Hotel Management from The Hong Kong Polytechnic University School of Hotel and Tourism Management, Adriane has developed a solid knowledge in hotel management through her previous operational experience in The Peninsula Hong Kong and The Upper House. 
