Last year, when traffic in Hong Kong was hit harder by Sars than was Shanghai, Hong Kong was still ahead for the whole year - counting nearly 27 million passengers compared with Shanghai's 25 million.

But this year has been a different story, with Shanghai reporting a record year, according to data from the Airports Council International.

The passenger count between Hong Kong and Shanghai varied by only a few thousand for the first seven months of the year.

But with Shanghai growing much faster, it seems certain to overtake Hong Kong by year-end. Closer to home, Guangzhou is expected to expand quickly with its new airport.

At present, it has little more than half of Hong Kong's passenger count. Moreover, expansion of new routes and new airlines can be a slow process.

The most recent expansion at Guangzhou has been with flights from its home-base airline China Southern and its subsidiaries, although foreign airlines are expected to steadily add and expand services to Guangzhou. And some of that growth will result in losses to Hong Kong.

The growing competition between the bigger airports - such as Guangzhou, Hong Kong, and Shanghai - may mean that smaller airports in the region will lose out.

For instance, despite their smaller size (which would usually mean faster percentage growth), both Macau and Shenzhen are growing at a slower pace this year than the big airports.

And, given the fall in traffic last year as a result of Sars, Macau's 37 per cent growth this year can be seen as less than impressive.

partnership of unequals

If Cathay completes its planned 10 per cent purchase of Air China - whose group includes Air Macau and Dragonair - the three SAR airlines may work together.

Currently they are fierce commercial rivals. How are they doing?

When compared with 2002 - to lose the distortion caused by Sars - it seems that in broad terms, Air Macau is struggling, Cathay is doing well thank you, but Dragonair is storming ahead.

Some returns, however, show there are some less-obvious areas of concern.

Over the first three quarters of this year, all three were filling less of their capacity than in 2002 - considered a danger sign when there is downward pressure on fares and freight rates, as there is today.

Yet Cathay, despite being the biggest of the three, is filling a greater portion than its smaller rivals - a comfortable 77 per cent for the passenger measure, and 72 per cent for passengers and cargo.

Load factors at both Air Macau and Dragonair run in the 60s, and are particularly weak in traffic measures that include freight.

for richer or for poorer

Bob Burns, co-founder of Regent Hotels, says that since the start of flights by a low-fare airline from Britain to an airport near his luxury resort in Tuscany, the numbers of guests at the Italian property has seen an appreciable increase.

Travellers are taking a US$20 flight to Tuscany, then paying as much as US$1,000 a night at Mr Burns' resort.

This indicates that budget airfares are motivating people to get up and travel - not just providing low fares for people who are planning to travel.

budget hotels recovering

In Hong Kong's economy hotel sector, two-star hotels are not growing as fast this year as three-star hotels. One reason, though, is that they suffered less badly from Sars last year.

Last year, occupancies at two-star hotels were running at about 62 per cent through to August, compared with 58 per cent for three-star hotels.

This year, both were running at near 90 per cent for the same period.

Compiled by Murray Bailey, research director and editor, Travel Business Analyst