How Does Tourism Affect Hong Kong?

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How does tourism affect Hong Kong economically?

Tourism is one of the biggest industries in Hong Kong. In fact from research, Hong Kong is one of the most popular single destinations for tourists in the world. Hong Kong relies very heavily on tourism. Without tourism there wouldn’t be Hong Kong. Each year, Hong Kong brings in more than 10 million tourists. However, there are both advantages and disadvantages of the large tourism industry in Hong Kong.

Social Costs and Benefits

Firstly, tourism brings to Hong Kong both private costs benefits, as well as social costs benefits. Private costs are costs paid by economic decision makers. Private benefit is benefit received by economic decision makers. Social costs and social benefits are costs and benefits associated with the society.

  • Private Benefit + External Benefit = Social Benefit
  • Private Cost + External Cost = Social Cost

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This Social Cost and Benefit graph clearly shows the system of tourism. The private cost of tourism is the money spent by the government or private sectors to lure more tourists into Hong Kong. This could mean building more landmarks and tourist attractions or improving the surrounding environment. On the other hand, private benefit is when bringing in more tourists, a higher level of employment level could be achieved as the companies would be much more likely co hire more labour to improve the company’s service and efficiency to make more money from the tourists.

The external cost of tourism is resulted from the usage of Hong Kong’s land to produce landmarks to attract coming tourists. External cost of tourism also includes environment damage or loss of greenery. The external benefits of tourism is when the local companies improves their services in order to attract tourists, there would be a higher standard of living for the local residents.

The opportunity cost of the tourism industry is the next best alternative. If land is not used up to create build landmarks for tourists, the next best more might be to build better schools for improved education.

For the society, the total benefit is the private benefit + external benefit, or in other words the social benefit. Only when the social benefit exceeds pass social cost will the tourism industry be beneficial to Hong Kong. Therefore, the role of both the government and private sectors is to decide to produce the right amount of services to make the tourism industry beneficial to Hong Kong.

Circular Flow of Income

A circular flow of income could be suited to the tourism industry. In a circular flow of income diagram, it shows the flow of money around the economy as it as passed between consumers and producers over time. The withdrawals from an economy is the money which is paid for goods and services what are produced within the economy such as tax and savings. Injections are the government expenditures, investments or exports. Sometimes in the short term, withdrawals might exceed injection, however if the injection in the long run is more than that of withdrawals, there will be economic growth.

National Income

The tourism industry plays a large role in contributing to the national income of Hong Kong. It is researched that a tourist is more likely to spend more money during their holiday weeks than any other week of the year. Therefore when tourists visit Hong Kong, they tend to spend a large proportion of their savings all in the particular visit to Hong Kong. The income from the tourism industry is mainly contributed by hotels, restaurants, amusement parks, shopping, and tourist attractions. From research, in the year 2001, each tourist visiting Hong Kong spent an average of $4532HKD. This extra spending from tourists leads to a total addition to the GDP of Hong Kong. It also leads to more income by both private and public sectors. As more income is made by private sectors, the government would therefore tend to collect more tax revenue. They can use this money to spend of schools and colleges, hospitals, roads and many other services which would benefit us all. When the National Income per capita exceeds the number from the previous year, we say there is economic growth.

Economic Growth

Hong Kong, like any other economies grows from booms and suffers from slumps. But in the long term the economy continues to grow. During a boom, the standards of living are high because the unemployment level is low meaning everyone has a job to earn money. More money means more spending to satisfy people’s needs and wants. However during a boom, there is also a high inflation rate and a high deficit for the balance of payment. In a slump, or in other words a recession, the standards of living are low because of a high unemployment level. Less people are hired for services meaning less people have money to spend for satisfying their needs and wants. But on the other hand, the inflation level is low and there is also a low deficit for balance of payment.

As you probably know, the impact of SARS on Hong Kong tourism industry has been greatly damaging. During the SARS period, Hong Kong headed into a slump, in other words a recession. When a recession occurs, there are many negative effects to the economy. For example, the standard of living might drop, demand for goods might decrease, high unemployment level, deflation and much more. From the graph below, it clearly shows that during April 2003 to July 2003, the average visitor arrival has dropped magnificently from a monthly average of 1,347,386 to 493,666. This was due to the Severe Acute Respiratory Syndrome. Because the tourists were tried their best to avoid nearing not only Hong Kong but the Asian region as well where SARS was most devastating, there was a huge decrease in the tourism industry in the South East Asian Region. A lot less income was received by the local firms from tourists coming into Hong Kong. Even if tourists were to visit Hong Kong, they stayed for much shorter periods. However, the tourism industry as shown from below has begun to bounce back earlier than many expected.

Attractions offered to Overseas Visitors

Hong Kong has known to be “The City of Life”. But has Hong Kong lived to its reputation? Are tourists who visit Hong Kong satisfied by the attractions which Hong Kong has to offer?

According to the primary data which I collected from my surveys at different tourist points. I have found out that most tourists like to visit attractions such as The Peak, Stanley and the Big Buddha located on Lantau Island. These are the three most popular attractions in Hong Kong. However, the list goes on. Whether it’s the museums, great restaurants or the exciting nightlife, the Hong Kong tourism association tries their best to guarantee to offer a tourist an unforgettable experience.

Tourist Attractions – Hong Kong provides fun-filled experiences for tourists. The top tourist attractions include:

  • The Peak Tower- The peak tower is definitely the place for tourists to visit if they want to take an overview of the magnificent infrastructures of Hong Kong. The Peak Tower has a wide range of restaurants and food outlets plus novelty shops where visitors can get a souvenir to preserve their memories of their exciting experience. A good idea of reaching The Peak Tower could be taking a ride on the Peak Tram where on the way up, a good overview of Hong Kong could be captured.
  • Stanley Market – The Stanley Market is one of Hong Kong’s most popular destinations for overseas visitors. It fulfills a tourist’s day with both fun-filled shopping and relaxation. The Stanley Market is an open-aired market where souvenirs could be bought at a bargainable price.
  • The Big Buddha – The Big Buddha is located on one of the out lying islands in Lantau. The Big Buddha statue weighs more than 220 tonnes and sits 24.6 meters high opposite the Po Lin Monetary on the hillside of Ngong Ping in Lantau Island.
  • Ocean Park – Ocean Park is the one and only joint zoo and amusement park in Hong Kong. Located in the southern part of Hong Kong, the Park exceeds more than 200 acre of land. Ocean Park provides a mixed experience of education and fun. Built in 1977, it was primarily to promote animal preservation in Hong Kong. Very soon, it became very popular with both tourists and local residents developing into an amusement park. Overtime, the park has been renovated and updated with the top entertainment facilities.

Shopping – Hong Kong has grown into the reputation for a shopping paradise. The shopping malls such as Times Square and Pacific Place provide tourists with famous designer labels at a reasonable price. On the other hand the open-air market places such as Stanley and Temple Street gives tourists a taste of the cultural life in Hong Kong as well as providing memorable souvenirs which could be bought at a low price.

Cuisine – The international city of Hong Kong provides tourists with a rich variety of cuisines ranging from Asian dishes to Western buffets. You name it, Hong Kong has it. Restaurants are located everywhere in Hong Kong.

  • Lan Kwai Fong – Lan Kwai Fong is a very popular destination among incoming tourists as it provides many western style restaurants along with bars and nightclubs.
  • Jumbo Floating Restaurant – The Jumbo Restaurant is the world’s largest floating restaurant. At anytime, the ship can hold up to 3200 customers and employed with more than 300 staff members. At the Jumbo Restaurant, tourists have a chance to try the sea-food of which local residents would normally eat.

Neighboring Cities – The neighboring cities of Hong Kong, including Macau and Shenzhen adds to a tourist’s to-do list during their visit to Hong Kong. Tourists can take advantage of the convenient transportation to and from these cities.

What needs to be improved and how can this be done? What is being done already and how successful has it been?

Although Hong Kong already has sufficient top tourist attractions, in order for them to lure tourists into come again, many things have to be done and improved. For example, improve the quality of the provided attractions or even to build new landmarks. In the past few years, the Hong Kong Government has planned to develop five major tourism clusters in the territory with a view to enhancing the attractiveness of Hong Kong as a premier tourist destination. The five tourism clusters cover a wide range of projects, which are at various stages of development. A number of enhancement projects are being carried out to give a facelift to the existing popular tourist areas including the Central and Western District, Sai Kung waterfront and Lei Yue Mun. Other improvement schemes coming on stream include those at the Tsim Sha Tsui Promenade, Stanley waterfront and the Peak. Visitor signage is being installed in all 18 districts to make Hong Kong more tourists friendly.

A number of major projects are also under way. Phase 1 of Hong Kong Disneyland, Tung Chung Cable Car and Hong Kong Wetland Park are all scheduled for completion in 2005. To enrich the heritage tourism products, the Government has awarded to the private sector the development right to restore and convert the former Marine Police Headquarters (MPHQ) compound into a tourism-themed development.

Planning work is being conducted for the development of the south-east Kowloon tourism node, the integrated arts, cultural and entertainment district at West Kowloon Reclamation and the preservation and conservation of the Central Police Station, Victoria Prison and the former Central Magistracy compound into a heritage-themed development.

The Hong Kong Government is also working with the Ocean Park in the strategic development plan of the park, which will form the basis for the development plan of the Aberdeen Harbour tourism node. Also taking forward a Harbour Lighting Plan to enhance the night vista of Victoria Harbour with the use of modern, energy efficient technology.

The promotion of tourism is not simply about construction of new facilities. The Government has not lost sight of the fact that Hong Kong’s traditions, offering visitors a fascinating insight into Hong Kong and Chinese history by providing museums and other

The HKTB also offers a culture and lifestyle experience program called Cultural Kaleidoscope, enabling visitors to try out tai chi and kung fu, or appreciate the arts of Cantonese opera, Chinese tea preparation, Chinese antiques and feng shui.

With the building of the World’s third Disney theme park outside the United States, millions of people are sure to want to have a taste of the action. Tourists who have visited Hong Kong once already would probably come back again to visit this new theme park. This project would surely attract more overseas tourists to transit to Hong Kong. Mr. Donald Tsang, the financial secretary spoke of the many benefits to Hong Kong’s economy from this Disneyland project.

He describes the project as an infrastructure investment and he said it would cause returns not only for the government, “but for ordinary people who are operating restaurants in Hong Kong. Our hotels will benefit. Our tourist industry will benefit. Our airlines will benefit. And all the retail shops will benefit as a result of more tourists coming to Hong Kong”. The construction of the new Disney Land will definitely bring more tourists into Hong Kong by 2005. Although the Park is mainly aimed at mainland Chinese tourists rather than western tourists, mainland Chinese tourists already make up more than 85% of the total visiting tourist.

The Hong Kong Government has also planned many campaigns recently after the SARS period to boost its economy. The campaigns included the Hong Kong Super Draw and the Harbour Fest.

Through August and September, the Hong Kong government held a Super Draw campaign to encourage spending within both local residents and tourists. The draw allows a chance to prizes totaling up to $15 million. To enter the super draw, participants must spend at least $100 in three different areas; dining, shopping and transport. For each $100 they spend, they will be given a stamp. A collection of all three stamps will be eligible to enter the super draw.

The second campaign which the government held after the SARS crisis was Harbour Fest. The Harbour Fest is music festival featuring both International and Local pop stars. The aim was to attract tourists to visit Hong Kong to watch this fantastic music festival. It also tries to prove to people that Hong Kong is now SARs free and would rise again to be one of the top international tourist destinations.

On July 27th 2003, the Hong Kong Stadium hosted a football match between the top class English Premiere League team Liverpool and the Hong Kong National Football Team. Following this event, the less than 2 weeks later, it again hosted another football match against the even more famous Real Madrid as the Government-sponsored mega-events of the Relaunch Hong Kong campaign.

The Hong Kong Government has raised all these campaigns to prove that Hong Kong is now SARs free and is capable of hosting international mega events.


In conclusion, the government has done a great job trying to boost its tourism industry especially after the SARS epidemics. In the meantime, it has raised many campaigns and promoted Hong Kong’s tourism in various ways. As most Hong Kong’s economist predicted, the tourism industry in Hong Kong will hopefully bounce back to its original state by the end of 2003.

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