BMI's Executive Summary

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Core Forecasts

Figures released in 2007 have continued to show an increase in visitor numbers to Hong Kong. In September, some 2,120,835 visitors arrived in the territory, an increase of 15.9% year on year (y-o-y). Year-to-date arrivals have reached 20,363,764, a rise of 9.6% y-o-y.

A sharp increase in arrivals came from China (up 22.1%, at 1,136,325 arrivals). Other markets showing strong increases included Australia, New Zealand and South Pacific (up 18.8%, at 73,573 arrivals) and Europe, Africa and the Middle East (up 10.2%, at 167,090).

So far this year, some 11,312,149 Chinese visitors have travelled to Hong Kong, an increase of 10.9% yo- y. Just over half of this number travelled under the territory's Individual Visit Scheme (IVS). Given the continued strong performance by the Hong Kong tourism sector, boosted by the 10th anniversary of independence celebrations seen over the summer months, we believe the time is right to make an upgrade to our visitor forecast numbers for 2007. We now believe that an increase in the order of 7.5% is achievable, meaning that we expect some 27.14mn visitors to arrive in Hong Kong during 2007. We have also upgraded our forecast for 2008, as Beijing's hosting of the Olympic Games should see an increase in two-centre holidays to the area, taking in both Beijing and Hong Kong.

Kai Tak Tender Launched

In November 2007, the SAR government launched an open tender for the development of a new cruise terminal at Kai Tak, which should see more cruise lines moving their operations to Hong Kong in the future. The tender closes in March 2008, with the successful bidder expected to be announced during Q208. The first berth is expected to be operational in February 2012. Consultative studies have put the economic benefits of the new Kai Tak terminal at between HKD1.4bn and HKD2.2bn a year by 2020. Estimates on the number of jobs to be created range from 6,900 to 10,900.

Oil Prices Once More On The Rise

The second half of 2007 has seen oil prices once again making record highs. BMI's economic analysts believe that oil prices will remain in elevated territory well into 2008, which will see fuel costs once more becoming a headache for international airlines. Our average price forecast for Brent crude for 2008 is US$72.00/bbl.

Chapter 1 - New This Quarter

Bird Flu Remains On Radar Screens

Chapter 2 - Market Overview

Tourism Outlook

Table: Hong Kong Travel Industry – Historical Data And Forecasts

2006

Table: Hong Kong – Historical Data And Forecasts (US$bn unless otherwise stated)

Table: Hong Kong – SWOT Analysis

Chapter 3 - Macroeconomic Scenario

Table: Hong Kong -Population And Output

Exchange Rate Trends Mildly Supportive Of Tourist Arrivals

Key Risks To Forecast Scenario

Chapter 4 - Special Focus: The Olympics

H5N1 Virus (Update): Still A Key Issue

Tourism Business Environment

Tourism Business Environment Ranking

Table: Asia Travel And Tourism – Business Environment Ranking

Politics – Long-Term Risk

Overall Business Environment

International Tourism Receipts

Visitor Arrival Growth

Investment Environment

Shock Factor

SWOTs

Hong Kong Business Environment Outlook SWOT

Chapter 5 - Travel

Commercial Airlines

Table: Oil Price Forecasts

Car Rental Firms

Cruises

Chapter 6 - Hospitality

Accommodation

Table: Structure of Accommodation Market

Gaming

Chapter 7 - Company Profiles

Cathay Pacific Airways

Shangri-La Asia

Melco International Development

Chapter 8 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Tourism Industry

Sources

Competitive Landscape for Asia Tourism Reports: Sample of Companies Ranked

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Comparative cross-border analysis assessing business and regulatory factors to rank Asia’s most competitive tourism markets. Indicators used include Political Risk, Business Environment Risk, Forecast International Tourism Receipts, Visitor Arrival Growth, Investment Environment and Shock Factors (taking account of any special factors such as terrorism, natural disasters and disease). Company SWOTs for leading resort, hotel, airline, travel and tourism operators in each market, including competitive intelligence on overall geographic presence, competitive positioning and relationships with international operators; % share of operator markets; % share of international arrivals and departures; % share of busiest domestic routes; main products and services; panregional expansion, merger and acquisition strategies.

Network of Asain Tourism Sources

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BMI's Asian Tourism Reports are based on an extensive network of multilateral organisations, government departments, tourism industry associations, chambers of commerce and company reports. Information sources include: