Hong Kong is losing its place on the tourist map.

A store in Tsim Sha Tsui was recently leased for 70% less than what Burberry Group paid in 2014 Photo: BLOOMBERG

Store rents are down from 10 years ago

The Chinese government has recently announced plans to further elevate Hainan Island’s status. Beijing aims to make all goods sold on the island duty-free by 2025. After that, duty-free retail will no longer be limited to the 12 existing shopping malls owned by travel retail giants like China Duty Free. Instead, the entire island will be duty-free. This means prices will be 10 to 40 percent cheaper on everything from cosmetics to wine and luxury goods.

The shift is affecting traditional luxury hubs Hong Kong and Macau, two special administrative regions of China. Hong Kong has traditionally enjoyed special status as mainland China’s duty-free shopping haven. While officials argue that Hainan and Hong Kong are complementary rather than competitive, the reality is that Hainan will provide a more attractive alternative for mainlanders to shop for luxury goods. LVMH, the world ’s leading luxury goods group, is shifting resources away from Hong Kong and focusing more on mainland cities including Shanghai and Shenzhen.

According to Jing Daily , Hainan is much larger than Hong Kong geographically, and its long coastline offers many natural attractions for tourism development. With more competitive prices and a larger number of retail stores to choose from, Hainan could become a top shopping destination for Chinese consumers.

Hong Kong media predict that even if mainland Chinese visitors increase significantly, they are unlikely to spend as much as before. Falling home prices and rising youth unemployment have dented consumer confidence in the world’s second-largest economy amid a bleak growth outlook. The rapidly depreciating yuan has also made Hong Kong a more expensive place to shop.

Air travel restrictions are also holding back tourism. Hong Kong airport, once the world’s third-busiest by international passenger traffic, is operating at 60% of its pre-Covid-19 capacity, largely due to staffing shortages. Hotels have also yet to fully return to pre-pandemic levels of service. “Transportation and logistics capacity are having a major impact on the number of visitors who can come and stay overnight in Hong Kong,” said Caspar Tsui, director of the Hong Kong Hoteliers Federation.

In a sign of Hong Kong’s business slowdown, rents in the city have soared. A store in the tourist hub of Tsim Sha Tsui recently sold for 70% less than the price the luxury goods giant Burberry Group paid in 2014. The latest tenant is a Chinese jewelry brand. “Tourists are looking for experiences, not just shopping,” said Gary Ng, a senior economist at Natixis bank.

A series of campaigns to promote tourism

The Hong Kong government has launched a series of campaigns this year to attract tourists and improve the city's image, including the "Hello Hong Kong" tourism campaign, free air tickets and bringing movie stars and influencers to Hong Kong. Hong Kong's financial secretary Paul Chan said the city needs to improve its competitiveness and attract tourists. He added that the city will host more events, such as night markets and exhibitions.

Recently, to capture the pent-up demand for MICE tourism in the region, the Hong Kong Tourism Board has organized a series of carefully arranged familiarization trips to boost business. More than 160 travel agents and companies from mainland China, South Korea and India visited Hong Kong to survey and experience first-hand. “Seeing is believing - the best way for people to experience what Hong Kong has to offer, as new attractions have been unveiled, innovative MICE products and generous financial support have been introduced,” said Kenneth Wong, General Manager of the HKTB’s MICE & Cruise Department.

The Hong Kong Tourism Board also announced that it will support filmmakers from other countries. Through this support, the Hong Kong Tourism Board wants to promote Hong Kong’s unique and distinctive culture through film. Currently, the Hong Kong Tourism Board is supporting the production of the Asian film “Under Parallel Skies”, starring famous actor Win Metawin and Filipino actress Janella Salvador.

HONG HANH

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