Hong Kong, citing budget surplus, may abolish its hotel tax By Laura Del Rosso / March 10, 2008 Share 1 -- SAN FRANCISCO -- The government of Hong Kong, citing a massive budget surplus and a goal of increasing travel and tourism, has proposed abolishing the city's 3% hotel tax.The proposal is expected to be enacted "within a short period of time," said Doris Cheung, director of the Hong Kong Economic & Trade Office in San Francisco."This is important to Hong Kong, because one of the pillars of our economy is travel and tourism."She said the abolishment of the tax, currently itemized on hotel bills, is intended to "help promote tourism and to attract more meetings, conventions and exhibitions to Hong Kong. To build Hong Kong as the main center in Asia for international conventions and exhibitions is one of our main focuses."Peter Yeung, president of Pacific Bestour, an Asia tour operator in Sparta, N.J., said the elimination of the tax would help make Hong Kong more competitive."Two years ago, we were talking about how expensive Hong Kong hotels were becoming, but now, especially with this move, Hong Kong will have an advantage against Singapore and Bangkok," he said."We're going to look into offering more Hong Kong packages because we expect to sell more of them."Laura Woo, a China specialist with West University Travel/American Express in Houston, said a 3% hotel tax makes little difference to her business and high-end leisure clients because they expect hotel taxes when they travel and aren't fazed by 3%.Hong Kong is a very popular destination with or without the tax, she said.Hong Kong's Financial Secretary John Tsang made the tax announcement in a late February address in which he outlined an expansive tax-cut program and increased spending on health services and measures to reduce pollution.The government also plans to use the estimated surplus, which amounts to about $14.8 billion, to build a new cruise ship terminal and add a third runway to Hong Kong's Chek Lap Kok Airport.Cheung said the government was taking bids for the cruise terminal, to be built on land where the former Kai Tak Airport was located. The goal is to have one berth ready for cruise ships by 2012."We are an ideal cruise ship destination because we have a deep water port and a lot of attractions and tourism infrastructure," Cheung said.The Hong Kong government took another step to lower prices to make the city attractive to travelers by eliminating duty on beer and wine levied on distributors. The duty ranged from 20% to 40% depending on the beverage.The main purpose of the move was to help make Hong Kong the main storage and distribution center for wine in the region, but visitors might see lower prices for wine and beer in Hong Kong as a result, Cheung said, adding that spending on wine is booming in Hong Kong and China.The moves come a few months before thousands of international media, athletes and visitors are expected in Hong Kong, which will host the equestrian events of the Olympic Games in August.Hong Kong also recently reported record tourist arrivals in 2007 of 28.2 million, an increase of 11.6% compared with 2006. Those figures include 1.2 million visitors from the U.S., a gain of 6.2% year over year.Hotel occupancy rates were also strong. For the year, average occupancy across all hotel categories was 86%, which is one percentage point lower than in 2006. However, there was a 9.3% increase in room inventory in 2007. To contact reporter Laura Del Rosso, send e-mail to email@example.com.