Experts caution that high prices and intense competition pose larger challenges for Hong Kong's tourism industry, despite the government's efforts to encourage residents to smile more.

• The Hong Kong government is promoting a campaign to boost tourism by encouraging hospitality among frontline staff and residents.
• According to experts, the main issues are high prices and intense competition from nearby Shenzhen.

Experts say that high prices and competition from an ascending Shenzhen are bigger issues for Hong Kong, despite its efforts to win back tourists by asking service workers to be more courteous and smile.

Despite being renowned for its luxury shopping, dining, and entertainment, the bustling financial district has not yet regained the visitor numbers it had before years of turmoil caused by social unrest and the Covid-19 pandemic.

The Hong Kong government launched a campaign called "Let's Go the Extra Mile" to promote good hospitality and enhance Hong Kong's reputation as the top tourism destination.

Last week, at a press conference, John Lee, the Chief Executive, encouraged residents to be more polite, to show more smiles, and to make an extra effort to promote Hong Kong's hospitality.

Despite 24 million total visitor arrivals in the first four months of the year, which is only 60% of the level from the same period in 2019, the initiative has been taken.

Despite the substantial rise in those numbers compared to the previous year, experts caution that achieving a full recovery may encounter more obstacles than the discontented residents of Hong Kong.

Strong dollar, high prices

"The major issue facing the city, according to Allan Zeman, chairman of Lan Kwai Fong Group, is our high cost," stated Lan Kwai Fong Group, the prominent property owner and developer in Hong Kong's renowned Lan Kwai Fong nightlife district.

Although Hong Kong's currency is linked to the U.S. dollar, which has contributed to its standing as a global financial hub, it can be costly compared to other Asian economies, particularly with the current high interest rates and a robust U.S. dollar.

According to Zeman, who is also an advisor to the Hong Kong government, tourists are discovering that destinations such as Shenzhen and Japan are remarkably inexpensive compared to other locations.

In recent months, the Chinese yuan has depreciated significantly against the U.S. and Hong Kong dollars, making it especially true for mainland Chinese travelers.

Zeman stated that the proportion of mainland tourists in the city has increased, while other nationalities have been slower to return. This presents a challenge for local businesses as mainlanders typically spend less due to their travel preferences, shorter stays, and tight budgets amid economic difficulties at home.

The Culture, Sports, and Tourism Bureau in Hong Kong predicts a rise in the number of tourists this year, but anticipates a decrease in per capita expenditure by overnight visitors to HK$5,800, a drop of HK$139 from last year's HK$6,939, as stated in the 2024 budget.

Hong Kong's popular tourist destination, LKF, was severely affected when the city's borders were shut down due to the pandemic.

Despite Zeman's claim that many of the neighborhood's businesses have bounced back, there are still some vacant spaces, which was a rarity during the pre-pandemic era.

Hong Kongers leave for bargains

According to economist Simon Lee Siu-Po, an honorary fellow at the Asia-Pacific Institute of Business at the Chinese University of Hong Kong, more and more locals are heading to the neighboring mainland city of Shenzhen for trips.

"Both have become equal problems for Hong Kong," he said.

Despite the city's borders being closed during the pandemic, Shenzhen continued to flourish as a top-tier Chinese city, with newly constructed high-speed rails and a mega cross-sea bridge making travel more convenient than ever, according to Lee.

Shenzhen now provides a comprehensive selection of food, leisure, and shopping opportunities, comparable to Hong Kong, according to Lee. He stated that the cost of goods and services in the city is often significantly lower, sometimes by as much as two or three times.

According to local media, thousands of Hong Kongers went to the Shenzhen border during the Easter holiday in late March, resulting in empty restaurants, bars, and shopping centers in the financial hub.

In March, the city with a population of 7.3 million people recorded 9.3 million residents leaving its passenger traffic control points. This was the highest monthly departure rate since at least 1997, when the city was transferred from British rule to Chinese sovereignty.

Meanwhile, only about 3.4 million visitors entered the city that same month.

Rapid rates of restaurant closures have contributed to a decline in retail sales in Hong Kong, as reported by local media.

A survey by the Hong Kong Small and Medium Enterprises Association found that 70% of local small and medium-sized businesses in the city experienced a decline in business performance post-pandemic.

Hong Kong authorities have allocated HK$1.09 billion for citywide events, including firework shows, to enhance tourism and spending.

To combat high prices and competition from Shenzhen, much more drastic efforts are needed, according to Lee and Zeman of LKF.