Slow expansion comes amid industry growth that has weathered many shocks October is generally a good month for the local travel business, for it is when a number of hotels report 100 per cent occupancy on some nights. Overall, the industry was ahead by a comfortable 30 per cent over the same month in 2000, indicating average annual growth of just under 7 per cent. Although it falls short of the preferred 10 per cent growth rate that Hong Kong prefers, it is particularly good considering the industry shocks that have occurred during the period - the September 11 terrorist attacks, the Bali bombing, and Sars. Outbound travel to destinations other than the mainland remains a weak point. And although airport traffic - which earlier in the year was underperforming other sectors - has still not caught up, growth at least is better. Apparent slow growth in hotel occupancy is mainly due to the fact that there is not much space to grow. The occupancy level recorded for the month (89 per cent) means that people are being turned away because they cannot get the dates, rates or hotels they want. food for thought According to the Big Mac Index by The Economist, the Hong Kong dollar should have been trading at $4 to US$1 by the end of last year (compared with $4.14 in 2003), and not at the controlled rate of $7.79. At the $4 level, local four-star hotel rates last year would have been running at US$272 rather than the US$140 actually achieved - a tasty 49 per cent saving. (Big Mac exchange rates are related to the cost of a standard locally-produced item - a Big Mac - and the official exchange rate. Its purpose is to reduce distortion caused by over- and under-valued currencies. Although an interesting indicator, the index is not regarded entirely seriously - even by The Economist.) cathay's cargo boom Cathay Pacific last year showed remarkable growth in freight - an area sometimes considered a more stable business source than passengers. When compared with 2002 - to avoid distortion caused by the drop in traffic in 2003 during Sars - Cathay is estimated to have added 17 per cent capacity for passengers alone last year, but 29 per cent for passengers and cargo combined, meaning a much-higher growth for cargo alone. The airline's traffic results confirm the boost in cargo. Its passenger traffic grew an estimated 16 per cent last year, but cargo was up a remarkable 24 per cent, pushing growth for passenger and cargo combined to 20 per cent. For an airline that is already strong in cargo traffic, such growth is impressive. However, affiliations in Cathay's cargo world may soon become complicated. Cathay owns 60 per cent of Air Hong Kong , with the other 40 per cent in the hands of DHL, the worldwide airfreight company. But one partner in DHL is Germany's Lufthansa Airlines. This has not been a significant factor, even though Lufthansa is one of the world's top five airlines in cargo - and a rival to Cathay in the passenger business. But Lufthansa now has plans to participate in a new all-freight airline based in Shenzhen. If all goes according to plan, the airline, Jade Cargo International, would be 25 per cent owned by Lufthansa. hidden struggle As results for Hong Kong's hotels in 2004 unfold, the business pattern is becoming clearer. Five-star hotels were hit hardest by Sars, and three-star ones probably the least. However, the strong overall recovery is also bringing some bad news - five-star hotels are finding it difficult to boost the price they are getting for their rooms. This struggle will be hidden by a substantial increase in revenue (because many more of their rooms last year were occupied), but not in per-room-per-day revenue. Growth in their average rate was only at 6 per cent for the first 10 months, compared with about 21 per cent at four-star hotels. Compiled by Murray Bailey, research director and editor, Travel Business Analyst