A Tale of Two Chinas--and Perhaps Two Mickeys

Mainland tourists are becoming a staple for the former colony

Paul Pei, chief of sales and marketing at Ocean Park, Hong Kong's biggest theme park, looks forward to the time every afternoon when the group tour buses roll into the parking lot. Out of the coaches pour thousands of Chinese mainlanders, always eager to see Whiskers the Sea Lion--the Ocean Park mascot--and his gang of seafaring friends. The arrival of the buses "is a highlight of my day," Pei says brightly. And no wonder. Ocean Park, which saw a big drop in attendance in the late-1990s Asian crisis, depends increasingly on those buses for its revenues.

So do tourist attractions all over Hong Kong. Chinese now make up the single largest category of tourists to the former British colony, thanks to their rising disposable income and efforts by the Hong Kong government to make it easier for them to cross the border. Hong Kong attracted 4.5 million Chinese tourists last year, up 17.5% from 2001; in the first six months of this year, 2.9 million Chinese crossed over. And while Hong Kong people once disdained Chinese visitors as poor country cousins, the touring mainlanders hardly fit the bumpkin stereotype. They are drawn mostly from China's nouveau riche, and they spend more per capita than Japanese or Korean tourists--and almost as much as the average American, according to the Hong Kong Tourism Board (chart).

The flood of mainland visitors to Hong Kong is one reason the government of Chief Executive Tung Chee Hwa reacted with such alarm to the news that the Walt Disney Co. (DIS ) is considering building a new theme park in Shanghai. Such a facility would compete directly with the Hong Kong Disneyland now under construction on Hong Kong's Lantau Island, scheduled to open in 2006. Disney will only admit that it is talking to officials about a new park in China. But a Shanghai city official says "negotiations are ongoing" to build a Shanghai Disneyland. Trouble is, Hong Kong is counting on mainlanders to make its $2.9 billion investment in Disney pay off. A Shanghai Disney park would be "very bad for Hong Kong," warns Michael C.M. Ng, executive director of China Travel International Investment Hong Kong Ltd., a Beijing-backed travel agent and hotel owner in the city.

Even without the threat of Disney in Shanghai, Hong Kong's dependence on mainland tourists is presenting some problems. For instance, more competition among travel agents booking tours to Hong Kong means commissions have plunged 50%, even though the market has grown 30% in the past year, says Ng. Meanwhile, just 15% of Chinese tourist spending is on hotels, compared with 46% for Americans. That's because Chinese shun the big five-star hotels in Hong Kong's Central business district, preferring three- and four-star hostelries in less fashionable areas. The cheaper hotels are feeling pressure to keep prices down. Rooms in China Travel's three three-star hotels, which Ng says once commanded nightly rates of up to $115, today go for less than $50.

Both the Hong Kong and Beijing governments, meanwhile, are moving to accommodate the new tourists. To make crossing from the mainland easier, Hong Kong has eliminated quotas on Chinese tourists. And Beijing has unshackled its travel agents, increasing the number of agents allowed to book Hong Kong tours from 4 to 67.

As far as Ocean Park's Pei is concerned, Hong Kong can't do enough to make the mainlanders feel welcome. They make up a third of the park's attendance; in the year ending June 30, some 1.2 million Chinese moved through its turnstiles. Ocean Park accepts not only Hong Kong dollars but also Chinese yuan, and a year ago the park started offering Mandarin language courses to Cantonese-speaking employees. Whiskers the Sea Lion, who understands all dialects, is exempt.

By Bruce Einhorn in Hong Kong

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