HK Tramways sees ad slump: Is the lack of DOOH a main factor?

A 15.4% fare rise on trams introduced by Hong Kong Tramways will take effect in July this year. Hong Kong Tramways said previously that the decreasing advertising revenue has been a contributing factor. It added that the potential to further increase advertising and other non-fare box revenue was limited, as all tram bodies generally carried advertisements and most tram stop shelters with commercial potential were utilised.

Magna said last December that linear ad spend for Hong Kong, which includes OOH, linear TV, print, and radio, grew by 20% in 2021, reaching US$2.1 billion, making up 55% of total budgets. However, this only made up 89% of its pre-pandemic values.

That said, some industry players believe that having DOOH would help mitigate Hong Kong Tramways' revenue loss. Kenny Ip, head of investment at GroupM Hong Kong told MARKETING-INTERACTIVE that the digitalisation of properties may attract more advertising dollars for Hong Kong Tramways, though it is a longer-term investment for the return. While the room to grow the tram's body itself is limited, Ip explained that the modernisation of the tram shelter and its body panel can be one of the areas to explore in terms of luring ad spend.

"Leveraging the technology and the rise of programmatic OOH, the messages in tram shelter and the tram body can be synchronised for more targeted and engaging creative delivery," he said. It is a known fact that advertisers have becoming more prudent with their ad spend as a result of COVID-19. 

However, GroupM has witnessed a recovery in ad spend on trams due to "the uniqueness of the moving billboard". Ip said that last year, companies in categories such as investment app of stock and crypto market, local or overseas properties and luxury were the frequent tram advertisers. According to Hong Kong Tramways' website, investment wealth management app StashAway, for example, has advertised at the tram shelter while Mercedes-Benz and The Glenlivet have leveraged tramcar advertising. 

Meanwhile, a 2021 study by VIOOH found that 76% of all Hong Kong media executives either agree or strongly agree that programmatic OOH is a clear part of their programmatic and digital strategy, with a greater number (82%) agreeing programmatic OOH provides excellent value for money. Programmatic OOH was also the top channel, with social media (80%), digital video (80%) and digital audio (70%) following closely behind.

With digital transformation being a huge focus for companies these days, Sally Ng, VP of sales at Hivestack Hong Kong and Taiwan explained that having new ad formats such as digital screens at tram stop shelters and within the trams are highly recommended to help the trams undergo digital transformation to boost business growth. According to her, it is beneficial for Hong Kong Tramways to adopt DOOH as it helps increase ad format variety, ad inventory, and provide data-driven programmatic DOOH choices for brands. 

On the other hand, Havas Media Hong Kong's MD Andrew Cawte, attributed Hong Kong Tramways' revenue loss purely to the COVID-19 pandemic rather than the lack of DOOH, adding that it will pass. "There's no mystery to it. Trams don't deliver reach or frequency. They are an iconic, impactful, status-defining, nice-to-have luxury, targeted primarily at wealthier consumers and tourists," he said.

With the pandemic and quarantine restrictions, he said the city "has been through troubled times". According to Cawte, Hong Kongers are financially pragmatic and when an ill wind blows, they tend to batten down the hatches and wait for the storm to pass. With no tourists over the past two years, a number of advertisers have also had to be more pragmatic with their budgets as a result. For Hong Kong Tramways to lure more ad spend on its assets, Cawte said the government would have to abandon hotel quarantines and the city would have to return to some semblance of normality. 

Hong Kong Tramways’ revenue is mainly comprised of passenger fare and non-fare box revenue from advertising. Passenger fares accounted for some 50% of Hong Kong Tramways’ total revenue in recent years. The company's advertising revenue has been decreasing over the years too, from HK$120.7 million in 2018 to HK$107.6 million in 2021.

Ideal to preserve trams' original appearance

Without a doubt, trams are very symbolic and historic transportation on Hong Kong island and dentsu Hong Kong's head of trading and partnership, David Chan, believes it might still be ideal to preserve the trams' iconic and original appearance instead of incorporating DOOH advertising into the tram bodies. He added that it may be better to preserve their most authentic outlook given there are also safety concerns that might restrict its room for full digitalisation. "Regardless, Hong Kong Tramways is investing more on elevating its advertising space by adding more special lighting and backlit effects," he said.

To achieve transformation, Chan said that the key focus should be the full integration of the tram experience, including travelling, advertising and tram stations or shelters, that combine more interactive, social media-driven functions rather than DOOH. 

"Advertisers are happy to continue spending on trams, and the decline in their spending acknowledged in these few years is only mostly due to social unrests and COVID-19. So under usual circumstances, trams are still considered a piece of very iconic street furniture on Hong Kong island, and a very ideal media for luxury and banking clients that want to advertise in the CBD and major shopping destinations such as Causeway Bay," Chan explained. 

To lure more spending on its assets, he said that Hong Kong Tramways can integrate more creative and special executions together with the tram shelters and increase the interactive elements within to offer a more holistic tram experience to the advertisers and customers.

Hong Kong Tramways' spokesperson said previously that the trams have a unique historical significance and have always been received by the local community and visitors. They have also represented the collective memory of Hong Kong citizens.

Additionally, Hong Kong Tramways has implemented various improvement projects and introduced innovative measures to enhance tram services to provide a safer and more comfortable experience for passengers, while preserving its historical value. Having considered all relevant factors, the government considered the fare increase necessary for maintaining Hong Kong Tramways' stable operation, and the proposed increase level by Hong Kong Tramways is acceptable, the spokesperson added.

Under the new pricing scheme by Hong Kong Tramways, passengers aged 12 or above will pay HK$3 from 11 July 2022 onwards, up from the current HK$2.6. At the same time, fares for children aged 3 to 11 will increase from HK$1.3 to HK$1.5. The monthly ticket will be priced at HK$260 after the fare adjustment, up from HK$220. A government spokesman said previously that the Hong Kong government should ensure that Hong Kong Tramways would have the sound financial capability in providing economical, efficient and quality tram services at reasonable fares.

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