Why influx of mainland tourists fails to cheer up HK retailers

February 12, 2019 07:33
Many of the mainland visitors who swooped down on Hong Kong during the Lunar New Year holiday preferred sightseeing and dining to shopping. Photo: Reuters

Up to 620,000 mainland visitors flooded into Hong Kong during the first three days of the Lunar New Year holiday, a 37 percent increase from a year ago.

The influx, however, failed to give retailers much boost as many of the visitors went sightseeing and dining instead of shopping.

Official data shows that a record of 65.16 million tourists visited Hong Kong in 2018, up 11.4 percent from the year before.

Of these visitors, 51.04 million were from mainland China, up 14.8 percent. Overnight visitors from mainland rose 7.4 percent to 19.9 million, while same-day visitors soared 20.1 percent to 31.14 million. Apparently, the latter group has been the key driver of visitor growth.

Meanwhile, the average spending by overnight mainland visitors dropped by a further 1.7 percent in the third quarter of last year following a decline of 2.4 percent in 2017, according to data released by Hong Kong Tourism Board.

No wonder many retailers complained about poor sales during the Lunar New Year holiday.

There several possible factors for the decline in the visitors' average spending.

More and more business visitors commute between Hong Kong and mainland on the same day following the opening of new cross-border infrastructure projects such as the Hong Kong-Zhuhai-Macau Bridge and the high-speed railway linking Hong Kong to Guangzhou. These people drive up the number of visitors but not necessarily retail spending.

There has also been a surge in one-day guided tours due to the improved transportation linkages, which brought a flood of mainland tourists to districts like Tung Chung and To Kwa Wan.

Also, tourists are spending less on designer handbags and watches as these products have become more accessible on the mainland through the internet.

That said, falling tourist spending on shopping is not necessarily a bad thing. Because what matters most is the value added by Hong Kong.

A designer handbag sold at HK$14,000 may only generate an added value of HK$2,000. But the same amount of money, if spent on other services, such as dining, or healthcare (not a few visitors come to Hong Kong for vaccinations, for example), or insurance products, could bring more economic value to Hong Kong.

China is set to reduce imports tariffs as its trade war with the United States escalates, which would eventually erode the competitiveness of Hong Kong as a shopping haven. The tourism industry has to transform sooner or later, and aim for tourists seeking higher-value-added services.

However, it seems both the government and industry participants lack vision. They only focus on attracting the maximum number of visitors to make quick money.

Given the city’s limited space and capacity, this short-termism is already hurting the reputation of the city as a top holiday destination as Hong Kong becomes increasingly overcrowded and the quality of its services worsens.

This article appeared in the Hong Kong Economic Journal on Feb 11

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist