For discussion
FCR(98-99)4
on 3 April 1998

ITEM FOR FINANCE COMMITTEE

HEAD 177 - SUBVENTIONS : NON-DEPARTMENTAL PUBLIC BODIES
Subhead 870 Hong Kong Tourist Association
New item "New Hong Kong Destination Campaign"

Members are invited to approve a one-off grant of $50 million to the Hong Kong Tourist Association for enhancing the New Hong Kong Destination Campaign.

PROBLEM

We need to rejuvenate the international image of Hong Kong and to re-stimulate overseas visitors' interest to visit Hong Kong.

PROPOSAL

2. We propose to make a one-off grant of $50 million to the Hong Kong Tourist Association (HKTA) to enable it to enhance its New Destination Campaign (the Campaign) to help repackage and reposition Hong Kong as an attractive tourist destination.

JUSTIFICATION

Downturn in tourism

3. Over the past ten years, the tourist industry in Hong Kong has enjoyed buoyant growth. The number of visitors increased substantially from 4.9 million in 1987 to 11.7 million in 1996. However, the latter half of 1997 saw a drop of 25% in visitor arrivals compared to the same period in 1996. Total arrivals in 1997 were 10.4 million (a decrease of 11.1% against that in 1996) and receipts amounted to $72.1 billion (a decrease of 14.7%).

Post-reunification perception problem

4. The reasons for the unprecedented drop in arrivals in 1997 are complex, and include the fading "1997 appeal" and the financial turmoil in our neighbouring economies. Surveys conducted by HKTA reveal that in major overseas markets there has been a change in visitors' perception about Hong Kong and people are less keen to visit Hong Kong than before. Main findings of these surveys are summarised as follows -

1. Hong Kong's position as a favourite international destination has weakened. Respondents felt that while our Chinese heritage would increase, the unique Western touch would disappear;

2. respondents were concerned about social unrest, political stability and personal safety after reunification;

3. the interest to visit Hong Kong had fallen, particularly in the short term. This suggests that we may have to face a long wait-and-see period before interest to visit Hong Kong picks up;

4. respondents generally considered Hong Kong an expensive tourist destination; and

5. Hong Kong lacked new attractions and tourist appeal. This was especially so in markets where there were a large number of repeat visitors.

The New Destination Campaign

5. To address the perception problems, HKTA will launch a large scale New Destination Campaign - "We are Hong Kong - City of Life" - to re-stimulate our markets and open up new geographic and demographic markets. It will focus on re-establishing confidence in Hong Kong after the reunification and her international flavour, and instil new desire for both new and repeat visitors to come to Hong Kong. The Campaign will provide the publicity impact and the support required for the industry to rebound and which the industry will greatly welcome particularly at this difficult time.

6. Launching of the new Destination Campaign with maximum intensity is very important especially when our competitors are mounting aggressive tourism promotion campaigns to get them out of the tourism downturn hitting the whole region. The Campaign is therefore not just a matter of addressing the perception problems on Hong Kong but also necessary in the face of the very aggressive publicity efforts of our competitors. Notable examples of the latter include Australia, Thailand, and Singapore. Although we have no comprehensive information on how much these countries are spending on their marketing campaigns, we understand that Thailand has spent some HK$23.4 million just on CNN and Time magazing. Judging from their exposure in various media, the investment these countries have put in appears to be substantial.

7. The Campaign aims to drive home to our target audience the message that Hong Kong is one of the world's top international cities, with dynamism and energy that provides non-stop stimulation. It is a city with concentrated diversity, offering much to see and do in the little time and space. It will also create a new post-reunification identity and emphasise the creative, cutting-edge of Hong Kong.

Programmes funded by existing resources

8. To project the above image, HKTA has already set aside $123 million to implement the Campaign, which includes consumer, media and trade travel promotions; development of marketing and publicity materials, such as films, videos and publications; TV and newspaper advertisements; research, surveys and studies; and improvement to visitor hotline services. Details of the programmes funded by subventions already provided for HKTA are at Enclosure 1. These programmes will be concentrated in the months from April through July 1998 to achieve the maximum intensity and impact on target audience.

Enhanced programmes under planning

9. Apart from programmes mentioned above, and for the reasons mentioned in paragraphs 5 and 6 , HKTA plans to step up its promotional efforts to strengthen the overall impact of the Campaign now before potential visitors firm up their travel plans for the coming summer vacation, and to capture the maximum marketing opportunity due to the opening of the new airport in early July 1998. Specifically, it plans to launch more intensive media activities and advertising. These include launching a special TV series in Fuji TV as well as buying TV spots in other secondary cities like Nagoya and Hiroshima in Japan, special TV bursts in CNN USA and NBC Sports in the USA, up-weight launch and sustaining bursts in a number of TVs in Taiwan, as well as TV quiz shows, promotion on radio stations and pictorial coverage in major magazines in the Mainland of China.

10. HKTA also plans to launch key market promotions in major markets in mid-1998, such as organising a Hong Kong Month in Japan with sound and sight exhibition, gourmet festival, popular music concert and fashion show. It also plans to launch consumer promotions in New York and Chicago. Both occasions will be supported by a high-level delegation from Hong Kong and other celebrities. Moreover, it will hold joint promotion with Mainland tourism authorities in the USA. It will also organise more trade fairs and roadshows in Japan and the Mainland as well as launching special marketing programmes to tie in with the opening of the new airport. Details of these programmes are at Enclosure 2.

11. With an enhanced programme for the Campaign, HKTA will be better able to achieve the desired degree of penetration into target markets, such as the secondary cities of our major markets, as well as to provide sufficient stimulation for first time and repeat visitors. HKTA estimates that the enhanced promotional programmes for the Campaign will require an additional $50 million, made up as follows -

Major activities	Expenditure ($ million)
Consumer promotion in key markets	14.0
Media promotions, including public relations and TV and newspaper advertisements	29.5
Trade shows and travel trade promotions	1.5
Promotional activities relating to the new airport	5.0
Total	50.0

Inclusive of this $50 million, the estimated total cost of the Campaign will amount to $173 million. A breakdown by programme of activity is at Enclosure 3.

12. The cost of the enhanced programme is beyond the present resources available to HKTA. In recognition of the importance we attach to tourism and the anticipated benefits of a more intensive campaign, we propose a one-grant of $50 million to HKTA to enable it to carry out the enhanced programme.

FINANCIAL IMPLICATIONS

13. Subject to Members' approval, we will disburse the grant of $50 million to HKTA in 1998-99 through supplementary provision under delegated authority.

BACKGROUND INFORMATION

14. We will make a recurrent Government subvention of $502 million to HKTA in 1998-99. In addition, we will provide other financial support to HKTA from time to time. These include $50 million for the setting up of a Tourist Development Fund in 1996-97 and more recently, a revolving loan facility with a commitment of $100 million for setting up an International Events Fund to help promote international events as added tourist attractions in Hong Kong.

Economic Services Bureau
March 1998

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Enclosure 1 to FCR(98-99)4

New Destination Campaign
Existing programme of activities

1. Research and Studies

1. Research work in new markets including Russia, Middle East, Mexico and South America.

2. New campaign testing in key markets and post launch survey to gauge market feedback to fine-tune and adjust subsequent marketing activities for the rest of the year.

2. New Hong Kong Visuals and Collateral Materials

1. World-famous photographers commissioned to take photographs that capture the exciting, dynamic, new perspectives of Hong Kong from a fresher angle.

2. Development of a new range of collateral materials to support the new campaign for worldwide distribution. These include theme publications to attract new market segments and repeat visitors.

3. Consumer Promotions

1. Celebrity endorsement programmes, including overseas missions. A joint promotion with the Hong Kong Ballet to be staged in New York to complement the marketing campaign.

2. Sales promotion and co-operation campaign with commercial partners.

4. Media Promotions

A. Public Relations

1. Hong Kong Essay Contest.

2. Roving exhibitions featuring new Hong Kong images in major markets.

3. Radio promotion in short haul markets.

4. Familiarisation visits by major media to coincide with the launch of the new campaign.

5. Web-site promotion in Discovering Hong Kong.

6. Cooperation with major TV shows in our major markets such as the Japan, Taiwan, and Southeast Asia.

7. Production of a series of Video News Releases to capture the world media's attention and gain maximum coverage of the "new" Hong Kong.

8. Worldwide media launch of the new campaign.

B. Media Activities and Advertising

A worldwide advertising plan, including TV advertising and spot buys and print media to penetrate a range of short-haul and long-haul markets in 15 countries. These advertising efforts include TV commercials in national and regional TV of major markets such as Southeast Asia, Korea and Taiwan, as well as other advertising medium such as printed media and inflight video.

C. Videos and Films

Videos and films production including one new promotional film for worldwide use, and two infomercials for cable TV in four different languages (English, Chinese, Japanese and Malaysian).

D. Tactical Promotions for New Segments

This will aim at family, senior, young explorers, cruise and honeymoon markets.

5. Trade Shows and Travel Trade Promotions

1. New travel missions to Mexico and South America.

2. First roadshow in Middle East.

3. "Contract Hong Kong" - to bring in potential trade partners from new and existing markets such as South East Asia, Middle East, South and Central America, Turkey and Australia/New Zealand.

4. Heavy presence at major trade shows such as BIT (Borsa International del Tourism) in Milan, ITB (Internationale Tourismus - Borse) in Berlin, PATA in Singapore, World Travel Market in London and International Travel Expo in Hong Kong.

6. Local Community Awareness Campaign and Improvement to Hotline service

Designed to arouse awareness of the importance of tourism and call for support from the whole community to be courteous and knowledgeable while receiving guests from overseas.

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Enclosure 2 to FCR(98-99)4

New Destination Campaign
Enhanced programme of activities

1. Media Promotions

A. Media Activities and Advertising

1. Japan : advertorial, Fuji TV (26 episodes in six months starting from April); TV spots in Osaka, Nagoya, Fukuoka, Sapporo, Hiroshima and Miyigi; and newspaper advertisement in The Asahi for four months.

2. Taiwan : up-weight launch and sustaining bursts in a number of TVs.

3. USA : special TV bursts in CNN USA, NBC Sports.

4. The Mainland of China : TV Quiz show in Guangdong, Beijing and Shanghai, promotion in radio stations in some secondary cities, as well as pictorial coverage in major magazines.

B. Public Relations

1. The USA

   A joint promotion with Mainland authorities in the "Mall of Americas" during the second half of 1998.

2. The Mainland of China

   Cooperation with radio stations in secondary cities such as Xiamen, Tianjin, Chongqing and Nanjing.

   Photographers' contest inviting participation from photo journalists from regional and national media organisations.

   National essay contest.

3. Japan

   Japanese Ambassador Programme.

2. Key Market Promotions

1. Participation in major Government promotions in Japan and USA in mid 1998 :

   Japan

   - Hong Kong Sound and Sight Exhibition

   - Hong Kong Gourmet Festival

   - Hong Kong Pop and Fashion 1998

   USA

   - Consumer promotions in New York and Chicago to kick-off the new campaign officiated by a high-powered delegation led by CS and other celebrities.

2. A "Hong Kong Month" in major markets celebrating the HKSAR's first anniversary such as Tokyo and Osaka in Japan.

3. Travel Shows and Trade Promotions

1. Trade fairs and promotional trips with Japanese Prefectures.

2. Travel trade roadshows in Beijing, Shanghai, Tianjin and Chongqing.

4. Promotional activities relating to the new Airport

1. To tie in with the opening of the new airport, cooperation promotion with AA/Sky-mall and MTRC Airport Express Line, with attractive offers, special programmes and events will be organised to boost arrivals.

2. Employ regional media such as Reader's Digest and Time magazine with special advertorials features.

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Enclosure 3 to FCR(98-99)4

New Destination Campaign
Breakdown of total estimated cost

Major Activities	Existing Programme ($ million)	Enhanced Programme ($ million)	Total ($ million)
Research, surveys and studies	4	-	4
Photography and publicity materials	21	-	21
Consumer promotions	1	14	15
Media promotions
Public relations activities	16	5	21
TV and newspaper advertisements, media programmes, promotional videos and tactical promotions	60.5	24.5	85
Trade shows and travel trade promotions	16.5	1.5	18
Local community awareness programme and improvement of visitor hotline service	4	-	4
Airport opening	-	5	5
Total	123	50	173