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

Hong Kong’s retail sector has languished because the pandemic and analysts say it may very well be years before it bounces back.

The town’s retail sales have plunged 7.3% in the primary seven months of the yr compared with 2023, in response to government data published Friday. That is despite an enormous 52.2% rebound in visitor arrivals throughout the period.

The town was once lauded as a shopping paradise, particularly for mainland Chinese 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) spent by same-day visitors and 67% of the HK$119.1 billion spent by overnight visitors in 2023.

But analysts said the golden days won’t return “for a protracted, very long time” as mainland Chinese tighten their purse strings under the cloud of economic uncertainty.

“The reduced spending of middle class Chinese tourists in Hong Kong might be attributed to the economic slowdown — began by the property downturn, shift in consumption patterns, increased give attention to savings on account of difficult 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 6,495 Hong Kong dollars ($833) per capita, rising 8.4% from 2019 levels. But same-day mainland Chinese visitor spending fell 37% to only HK$1,383 in 2023.

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

Concerns in regards to the economic situation on the mainland has trickled down into how money is spent elsewhere. Analysts pointed to the recognition of “zero-dollar” tours where travelers pay prematurely 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 his or her online accounts, but they do not spend money. They are not spending the identical sum 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 is the truth.”

Data from the Hong Kong Tourism Board showed town welcomed 34 million tourists last yr, including 26.8 million from the mainland. This can be a significant decline from 55.91 million overseas arrivals in 2019, 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 is a third of the value in Shenzhen. You get great food, good service and modern shopping malls,” Smith said, adding that many young professionals — often the most important shoppers — have emigrated out of Hong Kong.

Even wealthy Chinese have in the reduction of on luxury spending when visiting Hong Kong, Knight Frank’s Li identified.

“The decline in luxury spending by mainland Chinese 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 corresponding to watches, handbags, and jewellery from mainland Chinese tourists, has faced significant challenges,” she told CNBC in an interview.

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