Hong Kong’s retail sector can expect a “low double-digit decline” in sales this year

Data released by the Department of Census and Statistics showed that sales in January and February rose 0.9% and 1.9%, respectively, year over year, before falling 7% in March. According to provisional data, there was a further decline of 14.7% in April.

While retail sales grew 16.2% in 2023, some of the growth so far was likely due to a low baseline rather than real signs of recovery, Tse said.

“Even with the increase we have seen, it is only a few percentage points or double digits,” she said.

“These are not big jumps that make a big difference.”

She added that the sector had “already hit rock bottom” and hoped for growth next year.

She said the city’s retail industry continues to struggle with many issues, including staff shortages and high operating costs.

The sector’s efforts to attract spending from mainland Chinese tourists were also hampered by external factors such as the strong Hong Kong dollar and a low duty-free shopping threshold for such tourists.

The current duty-free limit is 5,000 yuan ($689) per person for each trip, a level that Tse has urged authorities to increase.

She also called on the city to address issues closer to home, such as encouraging residents to start spending money locally again.

“We are not talking about competing with the mainland on low prices because we simply cannot compete with them on that front,” she said.

“But the idea is to run more of our own promotions and maximize value for money.

“We still have great confidence in Hong Kong products.”

The government recently revealed that between May 2023 and April this year, residents made more than 74 million trips through border crossings to the mainland. This figure was more than double the approximately 28 million mainland-to-city tourist trips during the same period.

It also addressed industry concerns about the trend of a mass influx of Hongkongers to neighboring cities such as Shenzhen.

Simon Wong Ka-wo, president of the Hong Kong Federation of Restaurants and Allied Trades, said the popularity of cross-border tours had an impact on Father’s Day on Sunday.

However, Wong, who estimated the overall industry would generate sales of about HK$260 million ($33.3 million) for the full day, said the results were still “reasonable” given current economic conditions.

“Business seems to be going better than expected so far,” he said.

“This is likely related to the Dragon Boat Festival and other events in Tsim Sha Tsui, which have increased foot traffic and spending in the area.”

He added that while many families chose to go to Shenzhen to celebrate Father’s Day, continued heavy rains over the weekend may have prompted some people to stay in Hong Kong.

He stated that the economic situation was particularly good in the afternoon and evening hours.

Joffrey Poussade, operations manager at Scarlett Cafe and Wine Bar in Tsim Sha Tsui, agreed that business has picked up since Saturday, when the restaurant reached 65% occupancy for dinner.

On Sunday, he said the venue reached 100 percent capacity for brunch and dinner. Most of the customers were locals, but some were visitors from the mainland.

“(It was) good business overall this weekend, pretty busy,” he said.

“(Guests chose to) share, drink little and on a lower budget compared to the previous (pandemic) situation.”

Restaurateur Christopher Przemyski, who owns several restaurants in Sai Ying Pun, said business was “nothing special” on Sunday and described the reservation situation as “so-so.”

“Hong Kong’s economy is not great at all, many shops are closing,” he said.

He also noticed that customers had lower budgets even when dining out.

“People in Hong Kong are (nervous) about the future, so maybe they are saving money.”

Meanwhile, industry leader Tse said she generally welcomed the government’s recent launch of a courtesy campaign targeting the service industry as some businesses are likely dealing with tourists for the first time.

“In our most traditional tourist districts, service providers are very skilled at providing good service to our guests,” she said.

However, as tourist behavior changed after the pandemic and there was a greater focus on “cultural tourism,” some may have gone to districts that were not used to receiving many foreign visitors.

She said improving the quality of services is important, but the current challenging environment makes it difficult for businesses to invest in such areas while also coping with staffing pressures.

Statistics from the Tourism Board showed that 11.2 million visitors visited Hong Kong in the first quarter of the year, about 62% of the pre-pandemic number in 2019.