Hong Kong retail will miss mainland money
03/05/2016 04:07
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Rahul Jacob
HONG KONG, May 3 (Reuters Breakingviews) - Mainland Chinese
tourists have maxed out on Hong Kong. This is bad news for a
city that often seems like a giant mall - and hard to fix.
Chinese are forsaking the city for Tokyo, Seoul or Paris,
which are at once more exotic, boast more attractions, and have
become easier to visit. In contrast, Hong Kong now suffers from
"been there, done that" syndrome. Meanwhile, Beijing's graft
crackdown has dampened spending on watches and handbags. Bad
publicity about tensions with locals, and an over-valued
currency, are also big turn-offs.
Hence, visitor numbers from the mainland have plunged.
Official data is not yet available but the May Day long weekend
was probably quieter than last year. Overnight stays dropped 18
percent in the first two months of this year. Nomura analysts
estimate 16.2 million Chinese will come in 2017 - a 10 percent
drop versus the 18 million who arrived in 2015.
Even those that do come are spending less. UBS analysts
reckon as more affluent Chinese head elsewhere, spending per
head by their countrymen in Hong Kong will drop, falling 7
percent to HK$8,100 ($1,045) this year.
The big losers are global luxury brands like Prada 1913.HK
and Burberry BRBY.L , and local marques like Chow Tai Fook
1929.HK . The jewellery chain's first-quarter sales plunged 26
percent in Hong Kong and nearby Macau. Last week, Apple AAPL.O
blamed the Hong Kong dollar's peg to the U.S. currency for
declining quarterly sales in the city.
As leases for rentals in chic shopping districts come due,
the pain will spread to landlords, such as Wharf Holdings
0004.HK , which has shopping malls in areas once thronged by
wealthy mainland tourists. In some cases, building owners will
be forced to cut rents in half or more, according to some
analysts.
There is not a whole lot Hong Kong can do to combat this.
The dollar peg is central to the city's financial architecture,
so the currency will remain expensive. But, for example, Hong
Kong could try harder to repair its reputation on the mainland,
perhaps with an advertising blitz. It could also make it easier
for more Chinese to visit individually, rather than in big tour
groups. With stiffer competition for China's tourists, the giant
mall of Asia needs to put out more welcome mats.
On Twitter https://twitter.com/RahulJJacob
CONTEXT NEWS
- Retail sales in Hong Kong fell 14 percent year on year in
January and February, official figures show. Over the same
period, overnight stays by Chinese visitors dropped 18 percent,
according to the Hong Kong Tourism Board.
- Hong Kong retail sales data: http://bit.ly/23btTLp
- Hong Kong Tourism Board report: http://bit.ly/26z0UWs
RELATED COLUMNS
De-luxe urn:newsml:reuters.com:*:nL3N14P1S7
Arrivals and departures urn:newsml:reuters.com:*:nL3N14P1S7
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS
www.breakingviews.com/TOPNewsSubscription
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Editing by Quentin Webb and Katrina Hamlin)
((rahul.jacob@thomsonreuters.com;)(Reuters Messaging:
rahul.jacob.thomsonreuters.com@reuters.net))
Keywords: HONGKONG TOURISM/BREAKINGVIEWS