Hong Kong after Sars

When the World Health Organisation removed Hong Kong from the list of areas affected by Sars on 23 June, it marked not only the end of a terrifying three-month ordeal for the people of Hong Kong, but also the start of the recovery process for the city's hotel industry.

Occupancies had plummeted overnight from an average of 85% to as low as 5%, losing the industry an estimated £77.5m a month. During the crisis the city's hoteliers lured in locals with highly discounted special offers. Now, they intend to turn their attention to luring back the 1.6 million overseas visitors who stayed at home during the Sars crisis.

Before Sars almost 17.5 million visitors from overseas were expected to visit Hong Kong this year - a 5% increase on the previous year. Post-Sars the Hong Kong Tourism Board (HKTB) now estimates that visitor figures will be down by one-third on last year.

To kick-start the comeback, just two days after the all-clear, the 78 members of the Hong Kong Hotels Association (HKHA) launched a worldwide promotion aimed at boosting overseas business. Under the banner Be Our Guest, the campaign offers customers paying for two nights a third night free until the end of September.

"Although the overall price per night works out cheaper, the main focus of the promotion is to add value for our guests, not discounts," says HKHA executive director James Lu.

A stay at the Ritz-Carlton Hong Kong, for example, usually costs £116 per night. A three-night stay now starts at £232, based on a double room with breakfast. All hotels in the promotion can complement their core offer with additional attractions such as spa treatments or airport transfers.

This is the first time that all the HKHA's members - the majority of hoteliers in Hong Kong - have come together for a joint promotion, financed by themselves. "The hotel industry in Hong Kong has never been as united as it is now. We've all been through a very difficult time, and now is when we should all pull together. It's not about competition and undercutting each other, it's about working together," says Lu.

A week after the launch of Be Our Guest many hotels report promising signs that business is creeping back. Forward bookings are already trickling in and occupancies are climbing to about 30%. Not only that, but because prices are cheap and the streets are relatively empty, tourists are finding that there's never been a better time to visit the city.

"We are surprised at how immediate the comeback is," says Mark Lettenbichler, vice-president, Ritz-Carlton Hong Kong, and area general manager. "Primarily, business is stemming from the international corporate market. There is a lot of business out there from company executives who had to postpone their meetings in the city while the travel ban was in place. As a consequence, now they are coming back in force and staying three or four nights rather than two or three."

The Hotel Miramar is one of the main business hotels in Hong Kong and reported an occupancy of 100% just one week after the all-clear. "We had a convention of Japanese businessmen that weekend, which boosted June's occupancy rate up to 48%," says director of sales Winnie Woo. "Hopes are high that come September, the core month for conventions and international fairs in Hong Kong, the corporate market will be back to full strength."

Business from Asian corporate travellers, in particular from China, Taiwan, Japan and Thailand, is largely responsible for improved occupancies last month. Confidence among Asian corporate travellers had improved so much that Accor hotels brought forward its Smile Across Asia promotion from late August to early July, offering discounts of up to 50% at more than 80 participating hotels in Asia until the end of September. A night's stay at the Novotel Century Hong Kong costs from £57 - a 50% discount. In June alone, occupancy levels in Accor's three Hong Kong hotels improved by more than 13 percentage points.

Getting international tourists back, however, is more difficult, so hoteliers are targeting the local community - usually just 4-5% of the market - with weekend breaks.

The city's flagship hotel, the Peninsula, upped its local business in April and May by reducing its food prices by 25% and with its Three Peninsula Wishes promotion, available to Hong Kong residents only. For just £169 per night, in a de luxe room for the first night, and £60 for a second consecutive night, guests can customise their package by choosing three of eight options, including three food and beverage choices, Rolls-Royce transfer, two room upgrades or a complimentary night at a sister property.

"We saw this as a great opportunity to embrace the local market," says director of marketing Arthur Kiong. "Normally, business from local Hong Kong residents constitutes about 10% of our occupancies - probably more than other hotels in Hong Kong. Compared with April and May last year, when locals took up around 200 rooms each month, this increased to 1,000 rooms this year." The offer is available until 11 December.

By that time hoteliers are hoping to have seen the return of international leisure travellers encouraged once again with tactical rates and special offers through leisure tour operators such as Kuoni Holidays and Cathay Pacific Holidays.

The reality, however, is that full recovery may not come until next year's peak holiday season, starting in October 2004.

"It's highly possible that many international tourists have booked their long-haul holiday for this year," says Nigel Roberts, general manager of the Great Eagle Hotel Hong Kong, to be renamed the Langham in October. "Those who haven't booked yet need to be reassured that Hong Kong is now safe and up and running again. Attractive deals are obviously a major factor in encouraging visitors, but price alone is not going to override people's concerns regarding their safety."

Travel partners
This is where the hoteliers' co-operation with their travel partners, including airlines, tour operators and the tourism board comes in.

Last month the HKTB announced plans for its £80m international recovery campaign. In the UK alone £1.25m has been allocated for advertising, some 80% of which is "new" money. Advertisements began running in the national press this month and television, radio and poster advertising starts on 1 September.

Under the title "Hong Kong welcomes you", the HKTB launched a programme of attractions and events to be staged over the next nine months. The HKTB will also be organising trips for travel agents. "We need travel agents to start recommending Hong Kong again to their clients. Getting them out here to see that it is safe and as vibrant as ever is the best way," says the HKTB's director, Northern Europe, David Dean.

"In times of crisis we need all parties to work together, and the vast majority of hotels are happy to participate with our campaign to attract tourists back to Hong Kong."

When they do return they will notice that most hotels have implemented more stringent cleaning processes following the crisis. At several hotels, disinfectant hand solution is available at the entrance, personnel dealing with food will wear masks from now on, and some hotels, including the Hotel Miramar, take the temperature of all guests checking in.

"Hotels in Hong Kong have always had an excellent level of hygiene, but now we have stepped up our cleaning processes even more and are being more demonstrative about it," says Hotel Inter-Continental Hong Kong hotel manager Tom Myers. "Not all the measures are necessary to prevent the spread of a virus like Sars, they are simply to reassure guests that we continue to take the situation seriously."

Surviving the crisis

Some of the tactics hotels used during the Sars outbreak:

• Closing entire floors to cut operational costs or undergo renovation.
• Cross-training staff - from housekeeping to banqueting, for example.
• Staff taking unpaid holiday. Staff at the Great Eagle hotel took two days' unpaid leave in April and four days each month from May to July.
• The Hotel Miramar rented out several of its rooms to local companies as office space. Twenty of its housekeeping staff were used to clean local offices to boost income.

The latest figures

• Total visitor arrivals in May 2002 were 1.33 million. In May 2003 that figure was 427,254 - a 67.9% drop.
• UK visitors represented 2% of the total in May 2002 (26,774). In May 2003 just 0.8% of visitors were from the UK (just 3,369).
• Average occupancy rate across all categories of hotels and tourist guesthouses in Hong Kong in May 2002 was 83%. In May 2003 this figure was quoted by the HKTB as 18%. However, this was based on a smaller number of available rooms, as hotels had closed entire floors.