The local travel industry is anticipating a tough operating environment following the expansion of direct passenger flights between the mainland and Taiwan.

The deal between the two sides was agreed to yesterday. Hong Kong Tourism Board Chairman James Tien said the impact caused by the direct links hasn't been assessed, but he added that the travel industry will need to strengthen measures to attract more Taiwanese visitors.

The board is planning to launch a Hong Kong and Guangdong Christmas tour package in Taiwan, diverting the island's tourists to the city before reaching Guangdong.

Hong Kong Association of Travel Agents Chairman Michael Wu said the direct links will intensify the problems suffered by the tourism sector and related trades, including aviation, hotel and retail, in the financial crisis.

Wu estimated that about 20,000 Taiwanese will be aboard the 108 direct flights to the mainland each week. Currently, 70 percent of those travelers have to stop in Hong Kong before heading to the mainland.

Taiwan residents logged 2.29 million entries into Hong Kong last year, accounting for 8 percent of all recorded visits to the city.

The number of arrivals by Taiwanese travelers from January to August this year stood at 1.56 million, a slight increase of 2.3 percent over the same period last year. About 70 percent of those trips were made by travelers on their way to other destinations. The remaining 30 percent of the entries were those who stayed in Hong Kong overnight and spent an average of HK$5,000 in the city.

"Hong Kong's position as a transit hub is threatened," Wu said. "The consumption industry will be severely affected."

Taiwan Business Association Chairwoman Susie Chiang said she expects some Taiwanese tourists to be attracted to the direct flights to the mainland because they will be cheaper.

"Hong Kong being a transit hub will be affected," she said. "That is inevitable."

But she added that Hong Kong's position as a bridge between Taiwan and the mainland will not be affected because of the SAR's sound legal system and high degree of freedom.

China Airlines struck a more positive note.

Its spokesman pointed out that the number of passengers and flights between Taipei and Hong Kong won't be affected after the launch of weekend direct flights between the mainland and Taiwan province.

He said it is too early to assess the impact caused by the expansion of direct flights.

The spokesman said Hong Kong will maintain its unique position as a prominent city in the Pearl River Delta region and as a transit hub, as the city's airport has connections with many major international cities.

A spokesman for the SAR government said that the impact caused by the expansion of direct links will last for only a short time.

The spokesman said the closer ties between the mainland and Taiwan will enable Hong Kong to strengthen its position as a financial center.

(HK Edition 11/05/2008 page1)