Hong Kong’s consumption rebound led by wealthy stuck at home
HONG KONG — Hong Kong’s deep-pocketed consumers are going on a shopping binge, boosting sales of luxury goods and services amid continued COVID-19 restrictions.
Consumer spending in the city is bouncing back with a vengeance after a slump due to the pandemic. Retail sales in the first six months of the year surged 8.4% from the same period of last year even though there are no free-spending tourists from China’s mainland or other countries.
The robust recovery in consumption has been driven by extravagant spending by Hong Kong’s travel-loving rich, who have been forced to remain in the city.
A man in his 40s who works for a law firm in the city says he has never stayed in Hong Kong without going abroad for such a long period. Before the pandemic, this jet-setter regularly traveled around the world both on business and for leisure. But he hasn’t left Hong Kong in the past year and half due to the border restrictions. He plans to spend his summer vacation at a hotel, splurging on eating out and shopping.
This has benefited hotels and luxury brands in the city. Swire Hotels, the Hong Kong-based hotel chain operating upscale boutique hotels including The Upper House, is responding to strong appetite for luxury experiences among well-to-do domestic consumers.
Dean Winters, group director of operations at Swire Hotels, said he has seen “very pleasing results” from The Upper House’s staycation packages, especially those targeting luxury customers.
The Upper House’s most luxurious room the André Fu Suite, is opened this April to fulfil the needs of social craving for local guests. The 1,960sqft space which include a dining table for 18 and a spa area is priced from HK$60,000 per night. (Photo courtesy of Swire Hotels)
“Once people have realized that an overseas holiday is less likely, demand for many of the city’s hotels has been positive,” Winters said. “They are willing to splurge to make up for the lost time during the COVID-19 pandemic, craving for top-quality services and unique experience.”
Winters sees growing interest in personal well-being experiences such as spas, private fitness classes and meditation programs as high-end guests look for caring, personalized service.
“We have witnessed [this] from our hotel’s popular demand on wellness staycation packages and programs,” he said. “There is a stronger connection between hospitality and well-being as people seek to restore their mental clarity and take a break during the current pandemic situation.”
Winters added that the group’s focus in Hong Kong will be on stimulating local demand with attractive packages until international borders have reopened.
Charlene Ree, chief executive officer of China’s major provider of AI-based analysis of consumer behavior, EternityX, said Hong Kong families with high net worth typically spend 200,000 to 500,000 Hong Kong dollars ($25,700 to $64,200) on overseas trips during the summer holidays.
Restrictions on traveling have inspired these consumers to channel money to items that make them feel good, such as high-end jewelry, luxury handbags and posh cars, Ree said.
Apart from local Hong Kongers, the 1.3 million Chinese expats in Hong Kong have also contributed to the recovery in consumer spending.
An EternityX survey found that 61% of Chinese expats in Hong Kong said they were spending more this year than in 2020. Almost three-quarters of the 38% whose annual income is over HK$1.5 million were shelling out an average of more than HK$20,000 per month on luxury or beauty goods.
Kunming Diamonds, a Hong Kong-based jeweler that offers a wide range of natural colored diamonds, including extremely rare Argyle pink diamonds, has also seen steady growth in sales from local customers during the pandemic.
“We have definitely seen an increase in sales from the local customers in Hong Kong during the pandemic,” said Harsh Maheshwari, executive director of Kunming Diamonds. “The families who used to travel out of Hong Kong and splurge on fancy hotels, luxury handbags and fine jewelry instead spent locally.”
Some of these rich, freewheeling consumers are buying diamonds as gifts for themselves, he added. “[This] is something we have not experienced a lot of in the Hong Kong market previously.”
Kunming Diamonds, a Hong Kong-based jeweler that offers a wide range of natural colored diamonds, including rare Argyle pink diamonds, has seen an increase in sales from local customers during the pandemic. (Photo courtesy of Kunming Diamonds)
Azimut Benetti, an Italian company that builds and sells luxury yachts, has seen rising interest from customers both in Hong Kong and the mainland. A buyer from Hong Kong has recently made a hefty purchase of an Oasis 40M yacht, known for its unique “open-to-the-sea” stern with an infinity pool.
The firm said the nautical market has enjoyed a busy season during COVID-19 restrictions, as there is widespread desire for escape, freedom and safety.
There is demand from Chinese customers for bigger and bigger yachts, and they also are customizing their yachts to suit their adventurous lifestyles, such as dive expeditions, the firm added.
But the wave of spending has been largely confined to the wealthy class. Average citizens in Hong Kong are feeling little sense of economic recovery.
While sales of jewelry and luxury watches are strong, sales of food are running below year-earlier levels, according to official retail sales statistics.
Hong Kong is showing signs of a K-shaped recovery from the pandemic, with the upturn playing out unequally for different groups. While high-income earners are ramping up their outlays, some groups — especially low-wage workers — continue to struggle.
Hong Kong’s government is putting high hopes on the HK$5,000 consumption voucher program to boost consumption. The first HK$2,000 installment was distributed to the city’s permanent residents in early August.
Financial Secretary Paul Chan Mo-po expects the vouchers to create multiplier effects and eventually contribute 0.7% to this year’s growth in gross domestic product.