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Hong Kong
By Mary Kavanagh
The number of tourists from Mainland China visiting Hong Kong over the first five days of Chinese New Year dropped this year for the first time in almost 20 years. Visitor numbers decreased by less than half of 1 percent in stark contrast to a growth of 13.7 percent over the same time period for the previous Lunar New Year. The number of visitors from Mainland China in January rose 3.3 percent from a year earlier, compared with a 23.3 percent year-to-year increase in January 2014, according to Hong Kong Tourism Board data. Experts attributed the decline to a spate of recent protests against Mainland visitors and also to the increased popularity of other travel destinations, such as Europe and Japan. Those countries benefited from favorable exchange rates and eased visa policies for Chinese visitors. According to the China National Tourism Administration, tourists from the Mainland made more than five million trips abroad during the Lunar New Year, a 10 percent year-to-year rise over the same period. The most popular destinations were neighboring Asian countries, including Thailand, Japan and South Korea. A report from CSLA Ltd. banking and investment group said these latest figures showed that Hong Kong was losing out in the tourism industry. It also forecast that the number of Mainland visitors to Hong Kong in 2015 will grow by only 4 percent this year, compared to a 16 percent increase in 2014.
Hong Kong retail sales in January declined 14.6 percent in value and 13.9 percent in volume over a year ago, the worst decline since the Severe Acute Respiratory Syndrome (SARS) outbreak in April 2003. At that time, retail sales fell 15.2 percent, much more than the 6 percent decline expected by analysts. Sales of jewelry, watches and clocks and valuable gifts were particularly hard hit in January, decreasing by 21.4 percent in value from a year ago. Carolyn Mak, chairwoman of the Hong Kong Retail Management Association (HKRMA), said she didn’t see any factor that can boost sales in the immediate future. Mak added that she was generally pessimistic about the retail sector, particularly with Reuters reporting that weaker foreign currencies such as the yen and euro were drawing Mainland shoppers to other markets.
Two of Hong Kong’s largest luxury retail chains, Chow Tai Fook Jewellery Group Ltd. and Luk Fook Holdings (International), reported same-store sales in Hong Kong and Macau decreased 29 percent and 25 percent, respectively, over the Lunar New Year period. The holiday period fell later than usual this year, starting on February 19, skewing year-to-year comparisons. Luk Fook reported an overall drop in same-store sales of 21 percent for its self-operated retail shops over the Chinese New Year period compared to the previous year. Sales in Mainland China outperformed those in Hong Kong and same-store sales there were up 15 percent, with an increase of 65 percent in sales of gem-set jewelry. However, the 25 percent decline in same-store sales in Hong Kong and Macau dragged down the overall numbers. Luk Fook attributed the poor performance to the slowing economic growth on the Mainland, which impacts customer sentiment toward spending in Hong Kong and Macau, as well as to the devaluation of the Japanese yen and euro, which attracted many “high-end” Chinese tourists to shop in those regions instead. Credit Suisse lowered its gross domestic product (GDP) forecast for Hong Kong from 2.4 percent to 1.6 percent in 2015 and from 3.3 percent to 2.2 percent in 2016. The global financial services firm noted that it believes the government’s current projection of a 3.5 percent GDP growth trend is too optimistic and the “government and the general public are not prepared for a downturn in Mainland Chinese tourism yet.”
The market for tailor-made jewelry appears to be less impacted than the rest of the industry by the drop in tourist numbers and falling retail sales. Cally Lam, owner of L’Cally Jewel, a jewelry designer who makes contemporary one-of-a-kind pieces predominantly for high-end customers, but also for small retailers looking for something unique, said business has been okay. “Sometimes my customers give me a gemstone, for example, a family heirloom such as a piece of jade, and ask me to do a special design,” she said. Lam uses precious metals, colored gemstones and small diamonds in her award-winning creations. A spokesperson for Universal Jewellery, jewelry manufacturers and wholesalers, with a retail outlet in Central Hong Kong where it sells one-off high-end jewelry, said it has been in business for over 60 years and has many returning and new customers. The company’s shop closes over Chinese New Year so it’s not as impacted by the decrease in Mainland China visitors at that time. Word of mouth is very important in the market segment Universal Jewellery targets and Chinese New Year shopping is not critical.Article from the Rapaport Magazine - April 2015. To subscribe click here.
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