Situation and Outlook

Hong Kong's economy is beginning to recover after being hit hard by the global economic downturn in 2009. Visitor arrivals to New Zealand grew strongly in February and March, due to returning consumer confidence and the impact of Chinese New Year in February (it fell in January in 2009).

Economy

The Hong Kong economy was hard hit by the global economic crisis, but there have been clear signs of improvement since the second quarter of 2009, according to the Hong Kong Trade Development Council.

The economy contracted by 2.7 per cent in 2009 but has now rebounded to grow by almost 10 per cent in the first quarter of 2010. The Government forecasts it will expand by 4 to 5 per cent this year.

Unemployment was down in the first quarter of 2010, sitting at 4.4 per cent.
Retail sales have picked up notably in recent months, increasing by almost 19 per cent in the first two months of 2010 compared with the same period last year.

Key Indicators

Sources:
www.economist.com (GDP Growth)
www.xe.com (Exchange rates)

Outbound Travel

The Hong Kong travel market is showing signs of recovery after reaction to the economic situation and the Influenza A H1N1 (Swine Flu) outbreak impacted outbound travel in 2009.

According to The MasterCard Indexes and Insights Report (3 July 2009), Hong Kong consumers' top three reasons for saving are retirement, investment and personal travel.

This bodes well for the outbound travel market, but consumers remain cautious with their spending and are opting for travel options and lower-priced tours. Discounting is driving strong competition between long-haul destinations.

May and June are typically low season months for travel to New Zealand and Australia. The New Zealand dollar has risen, increasing tour package pricing and impacting negatively on tour bookings. However, for the Free Independent Traveller (FIT) market, New Zealand is still a well-priced destination.

Airline Update

Strong demand for flights between Hong Kong and Auckland over the summer resulted in an increase in air capacity.

Cathay Pacific increased Auckland to Hong Kong flights to twice a day from 1 November 2009. From mid-November, a 378-seat Boeing 747-400 took over from a 283-seat Airbus A340 on afternoon flights, adding an additional 100 seats per flight on this route.

Since October, Air New Zealand has operated two of its daily services as
'terminator' flights. Rather than travelling on to London, these flights only travelled between Auckland and Hong Kong, increasing seat availability for the Hong Kong and South China markets.

Air New Zealand is also providing more group seat allocations for Hong Kong agents and this is expected to stimulate group-tour growth.

Competitor Activity

Current pricing for a New Zealand nine-day tour is around HKD13,849. In comparison, a European 10-day tour is priced at HKD10,999, an Australian nine-day tour costs HKD10,199, a South African eight-day tour costs HKD7,959, and an eight-day tour to the US costs HKD7,699.