HK retail, F&B operators await return of tourists for survival

Hong Kong

REVELLERS were back in Hong Kong's popular Lan Kwai Fong nightlife district last Friday when bars and pubs finally reopened after a two-month closure as the city battled the spread of Covid-19.

But for Hong Kong's tourist-reliant retailers, the gradual easing of social-distancing measures brought little cheer.

In fact, fresh data released on Monday are saying the sector is looking a lot more like what was seen during the global financial crisis a decade ago.

Months of travel restrictions and distancing measures are hollowing Hong Kong's retail scene out to levels not seen in a decade.

In June this year, there were 61,650 private-sector retail establishments selling consumer goods and food and beverages, latest quarterly figures from the Hong Kong government showed. The last time there were fewer establishments was in September 2010 at 60,397.

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"I've not seen anything like this before," said Rai Jayanta, assistant manager at restaurant and bar Carat in Lan Kwai Fong last Friday.

"Of course it's good that bars reopen, but it's still hard. The locals, they come for one or two drinks then they leave. We want more tourists and travelling businessmen."

Added Professor Terence Chong of Chinese University of Hong Kong: "Until when Covid-19 ends and tourists come back, I simply don't think we have enough people to support our retail industry."

On Tuesday, Hong Kong chief executive Carrie Lam announced that the city will extend its virus-related social distancing measures for another week to Oct 1.

Bars, swimming pools and theme parks were among the establishments allowed to reopen last Friday. Bars are allowed to stay open until midnight, while dining-in at restaurants has been extended by two hours, also until midnight. The limit on public gatherings will be kept at four people.

Hong Kong has long been known as a shopping and dining hub. In 2018, some 65 million tourists injected HK$328.2 billion (S$57.8 billion) into its economy. The retail sector contributed 3.3 per cent to the city's GDP, and food and beverage, 2.2 per cent.

Then starting in June 2019, Hong Kong was rocked by protests and stores were shut. Tourism receipts fell by 22.7 per cent that year to HK$256 billion.

When Covid-19 struck soon after, the Asian financial hub had to close its borders and implement distancing measures.

Tourists all but disappeared, with arrival numbers for the first seven months of 2020 down by 91.2 per cent when compared to the same period last year.

As a result, hotel-room occupancy rates dropped 48 per cent while retail sales value slid 32.1 per cent over the same period. The value of total restaurant receipts fell by 26 per cent in Q2 2020 compared to a year ago.

Finding the situation untenable amid high rents, global fashion labels H&M, Gap, Topshop and Victoria's Secret recently announced they would close some stores in Hong Kong.

The Hong Kong Retail Management Association expects that a quarter of retail stores will shut by the end of this year.

The Hong Kong General Chamber of Commerce found that 42 per cent of small businesses and 24 per cent of large ones fear they will only be able to survive for up to six months if there is no further government support.

In a bid to assist local businesses, the government issued HK$10,000 in cash to residents to encourage them to spend locally.

The Hong Kong Tourism Board (HKTB) launched a promotion campaign in June to encourage locals to explore their own city.

But observers highlight that domestic tourism is unlikely to offset the loss in tourism receipts that Hong Kong's retailers have been so used to.

Economists point out that Hong Kong's retail sector was vibrant because it relied on shopping tourism, where retailers try to attract as many international tourists - mainly from mainland China - as possible.

Haiyan Song, associate dean and chair professor of tourism at Hong Kong Polytechnic University, said that with "no Chinese tourists, Hong Kong's retail sector will suffer quite a lot".

Some retailers agree. Lifestyle International Holdings, which operates Japanese department store Sogo, said that with weak consumer sentiment and a lack of tourists, it was "deeply pessimistic" about the city's retail sector for the rest of the year.

Yet, there are signs that things could pick up soon. Hong Kong is in talks with other jurisdictions to form travel bubbles, and a HKTB spokesperson said that short-haul markets such as Singapore and mainland China would be among the earliest to be open for travel to Hong Kong.

"HKTB expects that the resumption will start with business and essential travel, followed by leisure travel at a later stage," said the spokesperson.

More importantly, observers stressed that this was a chance for Hong Kong's retail sector to reconfigure itself.

For one, Covid-19 lockdowns have hastened the shift towards e-commerce, with major online portal HKTVmall being in the black for the first time since 2015. It profited at least HK$90 million for January to June this year.

"Hong Kong's retail and tourism sectors have been hit hard, but they could use this opportunity to diversify and change their focus," said Prof Song.