Spending to drop 25%: SARS hammers ad business in Asia

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[Hong Kong] At the epicenter of the SARS epidemic, Asian marketers are slashing ad spending, Cathay Pacific Airways is reportedly considering a shutdown, and top regional agency executives are fleeing Hong Kong.

Ad spending in Hong Kong may plummet by 25% this year due to severe acute respiratory syndrome, according to Roland Couch, chief operating officer in Hong Kong for Publicis Groupe's Zenith Optimedia. Earlier this year, Zenith forecast 4% growth in ad spending to $4 billion for Hong Kong in 2003.

The highly infectious virus is also affecting the ways marketers and their agencies work together. Just over half-51%-of Asian marketers have reduced agency meetings and travel, opting for phone calls and e-mail, according to a survey in mid-April of 150 marketers in Hong Kong, Singapore and Malaysia by Singapore-based consultant R3. In Hong Kong, 76% of marketers said they have cut back on agency visits.


Many Hong Kong-based executives regularly work from home to avoid germs at the office or in transit. Others have left the city entirely. Besides concern for their own safety, they risk becoming pariahs.

"Because our offices and clients don't want to see people who've just arrived from Hong Kong, I've been basing myself out of Japan and flying around the region out of Tokyo," said Keith Smith, Asia/Pacific chairman of Omnicom Group's TBWA Worldwide. Ben Barnes, regional director of Interpublic Group of Cos., is also considering relocating for a time to another regional hub such as Bangkok.

R3 Director Greg Paull said "marketers in Hong Kong have been most drastic in their action, with 94% agreeing that SARS has caused them to significantly reduce their immediate [advertising] plans or at least re-evaluate their activities." More than 78% of respondents in Malaysia and Singapore said budgets have already been cut, and at least ten indicated cuts of more than 20% already for the year.

A published report based on a leaked internal memo suggested Hong Kong-based Cathay Pacific might ground its fleet if the number of passengers falls below 6,000 per day. The airline normally carries 30,000 passengers daily at this time of year, but that figure has already dropped below 10,000. But Cathay said it has no plans to cease operations, even though 42% of its scheduled flights have been canceled.

The Hong Kong Tourism Board "pulled all the advertising we could as soon as the virus hit," according to the group's senior manager-marketing communications, Kenneth Wong. The board is working with its global agency, Interpublic's Foote, Cone & Belding Worldwide, on a post-SARS marketing program.

Right now, a low profile is preferred. An official at the International Advertising Association said the group can't start public relations efforts for its World Congress next May because of the venue-Chinese capital Beijing.

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