‘Golden era’ for Hong Kong retail is over as Chinese tourists continue to tighten their purse strings

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‘Golden era’ for Hong Kong retail is over as ******** tourists continue to tighten their purse strings

Tourists from mainland cities enter a Louis Vuitton store at Tsim Sha Tsui on June 5, 2024 in Hong Kong. 

China News Service | China News Service | Getty Images

Hong Kong’s retail sector has languished since the pandemic and analysts say it could be years before it bounces back.

The city’s retail sales have plunged 7.3% in the first seven months of the year compared with 2023, according to

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. That’s despite a massive

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during the *******.

The city was once lauded as a shopping paradise, particularly for mainland ******** tourists, often seen exiting luxury stores with multiple bags in hand. Mainland China accounted for nearly 90% of the 22.16 billion Hong Kong dollars ($2.84 billion)

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and 67% of the HK$119.1 billion spent by overnight visitors in 2023.

But analysts said the golden days will not return “for a long, long time” as mainland ******** tighten their purse strings under the cloud of economic uncertainty.

“The reduced spending of middle class ******** tourists in Hong Kong can be attributed to the economic slowdown — started by the property downturn, shift in consumption patterns, increased focus on savings due to challenging employment prospects and changing travel preferences,” said Christine Li, head of research for Asia-Pacific at Knight Frank.

In 2023, overnight tourists from the mainland spent

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) per capita, rising 8.4% from 2019 levels. But same-day mainland ******** visitor spending fell 37% to just HK$1,383 in 2023.

“Post-Covid, mainland ******** consumers are prioritizing experiences over material goods, driven by a ******* to reconnect, make up for lost time, and live in the moment,” Li said. “This shift in values has led to weaker sales in high-end luxury sales, particularly noticeable in ******** consumer spending.”

Concerns about the economic situation on the mainland has trickled down into how money is spent elsewhere. Analysts pointed to the popularity of “zero-dollar” tours where travelers pay in advance for transportation, accommodation and meals. Tourists with limited budgets may not spend much beyond the prepaid expenses covered in these packages.

“They take pictures for their online accounts, but they don’t spend money. They’re not spending the same amount of money in shops or restaurants like they used to,” Simon Smith, Savills’ regional head of research and consultancy for Asia Pacific, told CNBC. “The golden era for Hong Kong’s retail market is over. That’s the reality.”

Data from the Hong Kong Tourism Board showed the city welcomed

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, including 26.8 million from the mainland. This is a significant decline from

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, with 43.77 million from mainland China.

Smith noted even Hong Kong residents are increasingly shopping in neighboring Shenzhen, just 14 minutes away via high speed rail.

“It’s a third of the price in Shenzhen. You get great food, good service and modern shopping malls,” Smith said, adding that many young professionals — often the biggest shoppers — have emigrated out of Hong Kong.

Even wealthy ******** have cut back on luxury spending when visiting Hong Kong, Knight Frank’s Li pointed out.

“The decline in luxury spending by mainland ******** tourists has had a deep impact on Hong Kong’s retail industry. Hong Kong’s retail sector, which was heavily reliant on high-end purchases such as watches, handbags, and jewelry from mainland ******** tourists, has faced significant challenges,” she told CNBC in an interview.

“Hong Kong, unfortunately, is going through some challenging adjustments, and tourists and locals now have a very different mindset,” Nick Bradstreet, Savills’ head of Asia-Pacific retail told CNBC.

Bounce back?

Although analysts believe that much time is still needed before consumer confidence from the ******** recovers, there is hope that Hong Kong’s retail industry could see a rebound — but focus needs to turn away from luxury spending.

“The focus is shifting from luxury items to creating engaging and memorable shopping experiences that resonate with a broader range of consumers,” Li said, elaborating that recovery is “feasible.”

Henry *****,  head of Asia-Pacific research at CBRE, was more optimistic about the bounce back in the city’s retail industry, but warned that it will take “longer than what we have experienced throughout the past few cycles” due to the current cyclical downturn and structural challenges in China.

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