Thanks to the opening of the Hong Kong section of the Express Rail Link (XRL) and the Hong Kong-Zhuhai-Macao Bridge in September and October 2018, total visitor arrivals to Hong Kong have continued to grow this year.
Mainland visitors, who account for almost 80% of the total, rose by 16.1% year-on-year in the first four months of 2019, but we should be aware of their changing composition. As the widely publicized one- and two-hour living circles within the Greater Bay Area have become increasingly achievable, the proportion of Mainland day-trippers surged from 55% in August 2018, the month before the commencement of XRL, to 62% in April 2019, while that of overnight visitors dropped from 45% to 38%. The fact that day-trippers normally spend much less than overnight visitors might partly explain why the retail sector hasn’t benefited as proportionately as before (Figures 1 & 2).
Overnight tourists from the Mainland have also changed their spending behaviour by spending less on shopping, but more on accommodation and restaurants.
In the meantime, per capita spending of Mainland overnight tourists, whose trend closely follows the value of the RMB, peaked in 2013 (Figure 3). With the RMB depreciating against the Hong Kong dollar by roughly 8% over the past 12 months, the spending power of Mainland tourists has been further eroded.
In April, retail sales in Hong Kong were down 4.5% year-on-year, following the 1.2% contraction for the first three months of the year taken together. The value of sales of jewellery, watches and clocks, and valuable gifts – a yardstick for spending by Mainland tourists and which contributes one-sixth of total retail sales in the city – declined 11.4%.
As both the composition and spending behaviour of Mainland tourists have changed, growth in retail sales in Hong Kong will probably be less sensitive to visitor arrival trends in the future. This “new normal” in the tourism sector will continue unless we can offer more to attract visitors to stay longer, and spend more, by improving their shopping experience.
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