Hong Kong’s retail and tourism sectors continue to struggle. Despite the government’s efforts to attract tourists with events like Night Attraction, monthly fireworks displays, and drone shows, recent data from the Hong Kong government’s census bureau revealed a significant drop of nearly 15% in retail sales in April. Iconic tourist spot, Stanley Market’s Murray Building, has turned into a ghost town with vacant rental spaces after tenants vacated and businesses closed down.
The Murray Building, located in Stanley, was built in 1844 as British military quarters and later transformed into a tourist attraction after over a century of development. In 2005, The Murray Building was sold to Link REIT (stock code 00823), together with the adjacent Stanley Plaza. Before the pandemic, Stanley was a popular spot for European and American tourists as well as the middle class. However, major tenants like H&M closed down in April this year, followed by the closure of a seafood restaurant on the ground floor and a German restaurant on the second floor. The Murray Building now stands empty.
During the financial year 2022-2023, the revenue for Stanley Plaza, including The Murray Building, was 68.8 million Hong Kong dollars. Despite stable rental income over the past four years due to the pandemic, the absence of tenants now indicates zero rental income for The Murray Building. Link REIT, the owner of Stanley Plaza, announced in February 2022 that an uninvited potential buyer expressed interest in acquiring the properties, leading to the decision to put them up for sale. Market sources indicated that Link REIT received five bids, with the highest offer reaching 2.5 billion Hong Kong dollars. However, the sale fell through due to uncertainties with mainland Chinese customs clearance. The annual report revealed that as of March 2023, Stanley Plaza’s valuation dropped by 39.3% from the rumored acquisition price to 1.518 billion Hong Kong dollars.
According to the Hong Kong Tourism Board’s “2024-25 Work Plan” submitted to the Legislative Council, the average per capita expenditure of overnight tourists in 2024 is predicted to be 5,800 Hong Kong dollars, a 15.95% drop from 2023. Non-overnight visitors, who accounted for half of the tourists last year, are forecasted to spend an average of 1,300 Hong Kong dollars per person, a 35% decrease from 2,000 Hong Kong dollars in 2019. These forecasts align with the trend seen on Chinese social media platform Xiaohongshu, indicating a rise in budget travel to Hong Kong.
The CEO of The Peninsula Hotel Group (stock code 045), Anthony Quine, also expressed uncertainty regarding the prospects of the Hong Kong Peninsula Hotel business in May. Due to deteriorating Sino-US relations, the hotel industry still lacks long-haul visitors from Europe and America, who still hold a negative perception of Hong Kong. The group’s assets include The Peninsula Hotel in Tsim Sha Tsui, The Peak Tower, and The Peak Tram. The Peak Tower, which is similar in category to The Murray Building, underwent renovation from 2019 to August 2022. Its revenue in the 2023 fiscal year reached 221 million Hong Kong dollars, a 57.9% increase from the pre-renovation and pre-pandemic revenue of 140 million Hong Kong dollars in 2018. However, the robust passenger flow did not drive up rental income at The Peak Tower, with a revenue of 137 million Hong Kong dollars in 2023, a drop of 34% from 2018 and 11% from 2019, reflecting a decrease in spendings by visitors. Even The Peninsula Hotel, the group’s main business, saw its revenue decline to 1.039 billion Hong Kong dollars in 2023, a drop of 23.2% from 2019.
Despite the renovation and revenue growth at The Peak Tower from 2019 to 2022, it did not boost revenue at The Peak Tower.
There’s a saying in the market that “Stanley is busy, but not enriching,” which may not be entirely accurate. Data from the Hong Kong Census and Statistics Department revealed that the total number of visitors in the first quarter of this year was 11.23 million, a 38% drop from 18.23 million during the same period in 2019. Hong Kong’s two major theme parks, Hong Kong Disneyland and Ocean Park, are still struggling to reach their 2019 levels of operation. In the 2022-2023 period, Ocean Park recorded 2.4 million visitors, significantly lower than 5.7 million in 2019, with a revenue of 839 million Hong Kong dollars, down by 51.64% compared to 2019. As for Hong Kong Disneyland, the data as of 2022 showed an annual visitor count of 3.4 million and revenue of 2.243 billion Hong Kong dollars, a decline of 47.7% and 62.9% respectively from 2019. These figures indicate a lackluster performance in tourism and spending at these attractions.
In late May, the Hong Kong government’s Census and Statistics Department released the provisional retail sales figures for April, showing a 14.7% decrease compared to the same period last year. Luxury goods saw the most significant decline in visitor spending, with categories like jewelry, watches, electronics, and other durable goods all experiencing sharp drops. Harbour City on Canton Road, reflecting the level of luxury shopping in Hong Kong, is showing signs of decline as well, with its parent company, Wharf Real Estate Investment Company (stock code 01997), reporting a 26.5% revenue drop to 5.474 billion Hong Kong dollars in the 2023 fiscal year compared to 2019. During Easter this year, Harbour City even offered five hours of free parking for car owners, indicating a pressing need to attract both tourists and local consumers.
In May, the Hong Kong government announced a total of 210 tourism events, including fireworks, throughout the year, but failed to inspire increased investment from the business sector. The Hong Kong Purchasing Managers’ Index (PMI) published by S&P Global dropped from 50.6 in April to 49.2 in May, falling below the 50 mark into contraction territory for the first time since October last year. S&P Global noted that the overall sentiment of private companies in Hong Kong remains pessimistic, especially among those in the wholesale and retail industries.
During a luncheon at the Foreign Correspondents’ Club (FCC) in Hong Kong, the former Chairman of Morgan Stanley Asia Pacific, Mr. Roche, reiterated his belief in the argument that “Hong Kong is finished.” He cited three main factors for this viewpoint: the fundamental weakening of Hong Kong’s economy, the unresolved conflicts between the US and China, and the diminishing political autonomy of Hong Kong since 2019. Mr. Roche emphasized the close economic ties between China and Hong Kong, stating that without a rebound in the mainland economy, Hong Kong’s recovery will be challenging. Reflecting on his experience of landing at the old Kai Tak Airport in the ’80s and being enamored by Hong Kong’s allure, he concluded that while the endurance of Hong Kong’s glory had surpassed expectations, “now it’s all over.” His final remark encapsulated his perspective: “Yesterday’s Hong Kong is not today’s Hong Kong, let alone tomorrow’s Hong Kong.”