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The Trouble With Tourism: Higher Numbers Aren’t Helping Retailers

At first glance, the recently-released Hong Kong tourism numbers were excellent. The Tourism Board happily announced that in 2018 the enclave set a record for the annual number of tourist arrivals, at 65.1 million. Not only that, the number was a robust 11% higher than the 2017 tally.

But that happy news masked an uncomfortable effect on the local economy.

Mainland mania

It’s no secret or surprise that Hong Kong tourism is heavily dependent on visitors from the mainland. As if to demonstrate this in physical form, the government opened the High-Speed Rail (Hong Kong Section) and the Hong Kong-Zhuhai-Macau Bridge connecting those three pieces of land, chiefly the mainland with Hong Kong.

2018’s lovely growth was fueled mainly by swollen mainland numbers; all told, they grew their ranks by nearly 15% on a year-over-year basis. That was far above the growth in any other tourist grouping(in fact, mainlanders comprised 78%of all incoming tourists). This included visitors from elsewhere in Asia — Japan’s number rose by less than 5% — and those from more distant lands abroad (the tally from America was a little over 7% higher).

Although some Hong Kong residents might complain, there’s nothing wrong with welcoming mainlanders to this little corner of the world. The problem is, their growing numbers don’t seem to be making a big dent in the economy.

Let’s zero in on one of the more critical macroeconomic figures in the immediate aftermath of the bridge’s opening. For November, Hong Kong retail sales rose by only 1.4% in value terms on a year-over-year basis. The December result was even more dismal, as it was essentially flat (okay, 0.1% higher) than in the same month of 2017.

Both months, predictably, saw a surge in the number of mainland visitors (26% year-over-year in November, 21% in December). Presumably many of these nearly 10 million people were setting foot in famous Hong Kong for the first time. It’s wonderful that they’re getting to experience the many delights the enclave has to offer. What they don’t seem to be doing is shopping, eating, drinking, etc. while there.

This has been attributed this to the slowdown in the mainland economy, plus the ongoing trade war between the country and the United States. But if either or both were deciding factors, those visitor numbers wouldn’t have risen at the rates they did. So what the data strongly suggest is that a great many post-bridge mainland visitors just don’t want to spend much, if any, money. Perhaps for a lot of them, Hong Kong is a low- or no-cost way to experience a “different” side of Asia.

The mainland on the move

Those factors cited by the commentators are almost certainly in force; after all, retail sales growth in 2018’s earlier months was more impressive (all told, full-year 2018 retail sales were nearly 9% higher year-over-year, a good result by any standard). But one of the most persuasive arguments for developing a locale’s tourism sector doesn’t seem to be applying in Hong Kong lately: build attractions and facilities for visitors, and they’ll happily spend money in your town.

Meanwhile, as many residents would opine, the streets of Hong Kong are stuffed with visitors and there isn’t an awful lot of room for more. If the latest tourism trends continue, those throngs will continue to limit elbow room in the enclave… without a complimentary boost to the many retailers in the enclave.

Source: Visitor statistics from the Hong Kong Tourism Board

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