Hong Kong's Next Act

Hong Kong's Next Act

As it looks to the future, one of the world's most popular tourist destinations is grappling with economic woes, the potential return of SARS—and an ever more complex relationship with its new best customer, China.

In France the creatures would have been dead and safely buried in a sauce, but in Hong Kong they're taken alive, squirting and wriggling. I'd come with an old friend to Po Toi O, an atmospheric fishing village in Hong Kong's New Territories where you select your meal from an elaborate living menu: lobsters, crayfish, crabs, squid, eels. While we ate, I assumed that the food on our plates had been caught by the poor fisherfolk themselves. Silly me. After the hefty bill arrived, the waiter informed me that the rock oysters had been flown in from Ireland, the grouper from South Africa—all to satisfy the relentless lust for epicurean novelty for which the Cantonese are famous.

This hunger, of course, may have been the root cause of one of the worst economic crises Hong Kong has faced in 50 years. The mysterious SARS virus, which arrived here in March from neighboring Guangdong province, is thought to have transferred itself to humans from an animal, possibly a civet cat, that had been penned up in a restaurant before being eaten. The epidemic ended up devastating the city. By the time it was over, 299 people here had died, and the tourism industry was reeling. According to some sources, travel businesses may have lost nearly $500 million in April and May, when room occupancy hovered around 20 percent and the number of visitors had shrunk by nearly 70 percent.

Just a few months later, however, when I returned to the city after nearly a year's absence, little evidence of the crisis remained. Surgical masks were nowhere to be seen; shopping malls and restaurants were busy again. In August, 1.64 million people visited Hong Kong, exceeding the typical monthly average of slightly more than 1 million. Hotel occupancy had returned to pre-crisis levels of nearly 80 percent.

Some things, in fact, seemed better than before. Taxi drivers and shop assistants, I found, were much more polite and eager to help than they used to be—some even wore a HONG KONG WELCOMES YOU! badge. SARS had also prompted much-needed improvements in public sanitation, especially in trendy areas such as Soho and Lan Kwai Fong, where modish restaurants, bars, and shops occupy run-down tenement blocks.

Most of all, SARS forced the city to rethink its economy, and especially its status as a tourist destination. For whether or not the virus reemerges this winter, as some public health officials fear, tourism in Hong Kong is facing an unprecedented set of challenges—and new opportunities—from China.

Up until 1997, when Hong Kong officially changed hands and became a Special Administrative Region of China, one of its chief attractions for many visitors was its nature as "a borrowed place on borrowed time." Famous novels—from Han Suyin's Love Is a Many Splendored Thing to John Le Carré's Honorable Schoolboy—traded on the city's exoticism and painted an exciting, romantic picture of an Asian bazaar, where spies, journalists, diplomats, and speculators of all stripes mingled against a fantastic backdrop of harbor, mountains, and skyscrapers. All this added a certain spice to even the most mundane of travelers' activities, like hunting down the latest camera or buying a made-to-order suit.

But when the British left—taking their red postboxes and cocked hats with them—Hong Kong began to feel much like any other modern Asian city. And as China itself opened up in the late nineties, another of the city's draws was lost: for many years, it had only been in Hong Kong that most people could see something of China. "Hong Kong is just not that special anymore," says David Webb, a longtime British resident and investor.

Today, Hong Kong's economy is shaky. Property values have plummeted, and the city is struggling with record unemployment (8.7 percent). High costs drove manufacturing across the border years ago, and the worry is that tourism, which pre-SARS accounted for 6 percent of the GDP ($30 billion in 2002), could be headed for a downward slide.

Eating and shopping rank as the top two activities of visitors to Hong Kong. Yet I found the Suzie Wong bar girls in Wanchai complaining that their customers are crossing the border to Shenzhen, where prices are much lower. And many shoppers appear to be doing likewise, finding that the same brand names (not to mention counterfeit and pirated goods) are available on the mainland for less.

If mainland China is one of the biggest threats to tourism in Hong Kong, right now it's also the city's savior. Figures from August show that arrivals from Japan and the Americas are down 36 and 13 percent, respectively. Arrivals from Europe, Africa, and the Middle East are down 21 percent. On the other hand, the city is attracting more travelers than ever from the mainland—the number of Chinese visitors in August grew 43.4 percent compared with 2002; they now account for more than half of Hong Kong's tourists. To further encourage travel here, the central government in Beijing has reversed its former policy and now grants individual visas instead of only group ones. "The impact of SARS wasn't as severe as expected, thanks to the mainlanders," says Richard Tsang Yok-sing, head of the Democratic Alliance for the Betterment of Hong Kong, which supports Beijing's efforts to prop up the city's economy through tourism. "Now hotels are even thinking of raising prices again."

Some in Hong Kong are optimistic enough to project that the number of visitors will climb from 16.5 million this year to 22.5 million by 2010 and 56.6 million by 2020, with the bulk of the increase coming from mainland China. To meet the demand, hotel groups including Marriott, Accor, and Shangri-La have suggested that twice as many hotel rooms may be needed in the city by 2020.

What kind of hotels—not to mention tourist activities—the mainlanders will want is something that still needs to be worked out. Currently, many wealthy Chinese use the trip to Hong Kong not simply to enjoy themselves but also to protect their savings. "The first thing many businessmen and professionals do is head for a bank or a stockbroker to open an account and get their money out of China," says Willy Lam, a writer and longtime China watcher. "This isn't traditional tourism." Beijing has increased the limit on the amount of cash mainlanders can take with them to about $4,800; this, combined with growing wealth in China, is a welcome sign for the city. For the moment, though, their spending doesn't entirely compensate for the loss of American, Japanese, and European travelers: although the Chinese, on average, don't necessarily spend less in Hong Kong than Westerners, they do tend to limit their purchases to particular things—such as gold and jewelry—rather than shopping at electronics and clothing stores and eating in top restaurants.

The economic crisis and changing visitor demographics have resulted in a bout of unfamiliar introspection in Hong Kong. The Tourism Board is now questioning what the city is really about.

It's currently championing a new $53.5 million global marketing campaign titled "Hong Kong—Live It. Love It!" Clara Chong, the board's energetic chief, roped in film star Jackie Chan and Japanese singer Yumi Matsutoyato make commercials that present the city's "vibrant and sensational lifestyle" and its "dynamic and sophisticated experiences."

Reactions to the program have been mixed. "There is a ring of desperation to all this," says Xiao Li, a university professor from Beijing who teaches in the city. "Hong Kong is about money, and spending it, and always has been. Slogans about loving the city sound ridiculous, especially since many people are heading to China for jobs."

Beyond the campaign, the board is trying new ways to broaden the city's image, in an attempt to garner more repeat visitors. One idea is to make Hong Kong an "events center," by hosting mega-events organized around both traditional festivities, such as the Mid-Autumn Lantern Festival and the Christmas and Chinese New Year WinterFest, as well as completely new ones like the Strato-Fantasia, a multimedia son et lumière in Victoria Harbour. By attracting visitors for such celebrations, "we can be a window on Asia," Chong says.

Another pillar of Hong Kong's strategy is a Disney theme park and new resort hotels scheduled to open in 2005 or 2006 on Lantau Island, near the airport. Disney expects 40 percent of the park's visitors to come from mainland China and the rest from as far away as India. Most important, the park should attract the lucrative family market, which today accounts for only 18 percent of visitors. "Our research tells us the park will bring in 5.6 million visitors in the first year," a senior Disney executive, who asked not to be identified, told me. "In fact, we think the market is so big that five or six years later there will be room for another park in China."

One aspect of Hong Kong that the government (and travelers, for that matter) largely ignore is the parks and beaches, which are some of the best in the region. One day on my recent visit I took a cab to Sai Kung in the New Territories and hired a wooden fishing boat to putter around some of the uninhabited islands, where you can stop at deserted beaches and take a swim in crystal clear water. Even the surfing is good.

To my mind, Hong Kong's attractions for leisure travelers not intent on shopping have always been overrated. Those who venture out of their Kowloon hotels into the crowded streets in search of authentic experiences often return enervated and bathed in sweat. The temples and sampans are not there. Neither, really, are vestiges of the old colonial Hong Kong. Property development has already destroyed much of what was unspoiled and unique here and is encroaching on whatever else remains.

One of the lasting effects of the SARS crisis is that it encouraged the city's usually apolitical citizens to raise their voices about a variety of issues, including the environment. Demonstrations have become increasingly frequent, from the July 1, 2003, protest against anti-subversion legislation—the second largest in the city's history—to a smaller one at the end of September calling for preservation of the harbor. Officials are now talking more seriously about the problem of air pollution, which, among other things, obscures views from the Peak.

These are encouraging developments. For even if travelers from Europe, America, and Japan never return in as great numbers as before, and the mainlanders do hold the city's future in their wallets, preserving—and promoting—natural attractions will be one significant way to keep the Chinese coming back. As they grow richer, and as brand-name shops, fine restaurants, luxury hotels, and theme parks grow more common on the mainland, they, like other visitors before them, will find themselves with fewer compelling reasons to stop over in Hong Kong. Easy opportunities to experience nature and open spaces and sea breezes, on the other hand, are becoming more scarce on the mainland every day. And so a side of the city that few now tout could one day turn out to be the real, best reason to live and love Hong Kong.

JASPER BECKER is a journalist who has covered Asia for 18 years. His most recent book is The Chinese (Oxford).

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