Guests pose for a group photo at the “Let’s Go the Extra Mile” hospitality campaign launch ceremony at Central Government Building in Hong Kong on June 3, 2024.
Nurphoto | Nurphoto | Getty Images
“One of Hong Kong’s biggest problems is simply high prices,” said Alan Zeman, chairman of Lan Kwai Fong Group, a major property owner and developer in Hong Kong’s iconic entertainment district, Lan Kwai Fong.
Hong Kong’s currency is pegged to the U.S. dollar, which underpins the city’s status as an international financial center, but at a time of high interest rates and a strong dollar, it can become expensive compared with many other Asian countries.
“Tourists are starting to realise that other cities like Shenzhen and Japan are much cheaper in comparison,” said Zeman, who also serves as an adviser to the Hong Kong government.
This trend is especially true for travelers from mainland China, where the Chinese yuan has fallen sharply against the U.S. and Hong Kong dollars in recent months.
At the same time, Zeman said mainland Chinese tourists make up a larger share of the city’s tourist population as other nationalities are slowing returning home. He said domestic economic problems are leading mainland Chinese people to change their travel preferences, stay shorter and spend less as budgets tighten, which is creating problems for local businesses.
The Hong Kong Culture, Sports and Tourism Board predicts tourist numbers will rise this year, but that per capita spending by overnight guests will fall to HK$5,800 ($742.64) from HK$6,939 last year, according to figures released in the 2024 Budget.
LKF, a popular tourist destination, was particularly hard hit when Hong Kong’s borders were closed during the pandemic.
Zeman said many of the neighborhood’s businesses have bounced back strongly, but some spaces now sit unused, something that was uncommon before the pandemic.
Conversely, locals are increasingly travelling to the neighbouring mainland Chinese city of Shenzhen, said Simon Lee Siu-po, an economist and honorary research fellow at the Asia-Pacific Business Institute at the Chinese University of Hong Kong.
“Both pose equal challenges for Hong Kong,” he said.
Li said that while the city’s borders were closed during the pandemic, nearby Shenzhen continues to develop as a top Chinese city, and a newly built high-speed rail line and a huge sea bridge make traveling to the city more convenient than ever.
Li added that Shenzhen now offers a wide range of food, entertainment and shopping options to compete with Hong Kong, and prices of goods and services in the city are sometimes two to three times cheaper than in Hong Kong.
This dynamic helps explain why thousands of Hong Kongers flocked to the border with Shenzhen over the Easter holiday in late March, leaving the financial capital’s restaurants, bars and shopping centres empty, according to local media.
Throughout March, 9.3 million residents departed from the passenger traffic control center in the city of 7.3 million people, the highest monthly departures since at least 1997, when the city was handed over from British rule to Chinese rule, according to government data.
Meanwhile, only about 3.4 million tourists visited the city in the same month.
The trends are hitting Hong Kong businesses hard, with local media reporting a sharp increase in restaurant closures and retail sales continuing to fall.
A recent survey conducted by the Hong Kong Association of Small Businesses found that 70% of local Hong Kong small businesses reported a decline in business performance compared to pre-pandemic levels.
In addition to campaigns like “Let’s Go The Extra Mile”, Hong Kong authorities have earmarked HK$1.09 billion for city-wide events such as fireworks displays to boost tourism and spending.
While the funding will help, much more drastic efforts will be needed to combat high prices and competition from Shenzhen, said Mr Lee and LKF’s Mr Zeman.
