International

Tourism Slows Hong Kong Retail

While Hong Kong has traditionally been the favored shopping destination of Chinese mainland consumers looking to grab up luxury items, it looks like 2015 may see the biggest drop in retail sales since 2003.

The drop 12 years ago was an outgrowth of the SARS outbreak that cause a global health scare. This year’s issue seems to be tamer and tourism based. This year saw the first annual decline in tourists from mainland China since 2003. The number of Chinese tourists in Hong Kong decline 15.4 percent between November of 2014 and November of 2015 — the biggest drop in a year where falling figures have been a norm.

Hong Kong has drawn high rolling consumers for some time with its luxury good shops with Gucci, Louis Vuitton and Chanel on sale for 40 percent less than is the norm in China.

For the last eight months, however, retail sales have been in decline — down 2.7 percent year-to-year — a bigger drop off than even SARS managed in 2003.

“The ‘luxury supermarket’ image is no longer attractive [for Hong Kong],” Clement Kwok, chief executive at The Hongkong & Shanghai Hotels Ltd., owner of the city’s iconic Peninsula Hotel told The Wall Street Journal.

“There is an urgent need for a new marketing campaign to rebrand Hong Kong as a dynamic, exciting and relevant modern city,” Kwok said.

There is also the reality that China’s affluent middle class is increasingly likely to search further abroad for luxury goods — aided by several nations that have relaxed visa requirements for visiting Chinese tourists. Hong Kong, on the other hand, has strengthened its visa requirements and disallowed visitors from the neighboring Shenzhen province to visit Hong Kong more than once a week.

In an attempt to turn things around, Hong Kong is looking to develop more experiential attractions including a second Disney theme park, sporting events and dining venues. But those ventures will take time. The more immediate challenge for local merchants is to fill the hole left by distracted mainland Chinese consumers in the meantime.

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