Hong Kong's tourism boom

The ongoing boom in mainland tourism to Hong Kong is likely to benefit a large number of Hong Kong-listed companies. Estimated reading time: 21 mins

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Hong Kong’s tourism industry is recovering.

Ever since its borders opened in early January 2023, we’ve seen more and greater numbers of tourists going from mainland China across the border to Hong Kong. These tourists are spending money left and right: on hotels, restaurants, souvenirs, and so on.

In this post, I will discuss companies benefitting from the boom. And to what extent the boom has been priced in by the market.

Table of contents
1. Evidence of a tourism boom
2. Companies benefitting from the boom
   2.1. Retailers
   2.2. Commercial property owners
   2.3. Restaurants
   2.4. Hotels
   2.5. Healthcare facilities
   2.6. Transport operators
   2.7. Telecom operators
   2.8. Insurance companies
3. Conclusion

1. Evidence of a tourism boom

Hong Kong’s borders were more or less closed during COVID-19. Travellers from certain countries were banned from entering or subject to quotas. There were quarantine requirements. And people were forced to present negative COVID-19 pre-departure tests before entering the city.

And after three years of COVID, the borders finally opened on 8 January 2023. The daily arrivals quota was initially set at 60,000 people per day. Then on 5 February 2023, the quota was eliminated altogether. By 8 March 2023, all border checkpoints were reopened, and there are no longer any restrictions on travel between Hong Kong and mainland China.

To jumpstart tourism, the Hong Kong government also launched a HK$255 million “Hello Hong Kong” tourism campaign, which involved giving away half a million air tickets to international visitors.

Since the border reopening, mainland Chinese tourism has gone bananas. In April 2023, the number of mainland Chinese visitors reached 2.3 million. The total number of visitors to Hong Kong has now reached 2.9 million people:

Source: Bloomberg

Separate numbers from Hong Kong International Airport confirm these numbers. It handled 3.1 million passengers in April 2023, compared to a 2.3 million average in the first three months of the year. April’s passenger arrival number represents roughly 50% of the pre-2019 level.

We’re also seeing a positive effect of tourism on Hong Kong’s retail industry. Hong Kong’s March retail sales rose +41% year-on-year, compared to a +31% year-on-year rise in February. While some of that recovery was surely due to the easing of COVID-19 restrictions late last year, tourism must have helped too.

And according to industry publication Skift, sales of jewellery, watches, clocks and valuable gifts jumped +165% year-on-year. Jewellery retailer Chow Tai Fook said its same-store sales for Hong Kong and Macau jumped +97% year-on-year in the first quarter of 2023. Incredible numbers.

There’s also plenty of anecdotal evidence of a boom in mainland Chinese tourism to Hong Kong. For example, the Asia Travel Reset newsletter reported that the presence of mainland Chinese visitors to Hong Kong could be felt in mid-May:

“Day-trippers are easy to spot. In the banks of Admiralty, mainlanders of all ages dominate the teller lines. Supermarket as well as brand shoppers are busy in Causeway Bay. Garment traders are over from Dongguan and tech guys from Shenzhen. Plenty of people are meeting relatives and friends who live, work or study here. I chatted at the airport bar with a VC guy from Chengdu working on a deal that will bring him back “6 or 7 times this year”.”

Pictures are starting to appear across social and traditional media of mainland tourists visiting Hong Kong. Here are a few examples:

Source: Xinhua

Source: Dickson Lee

Source: Yicai Global

Source: Global Times

Source: Xinhua

Source: Bloomberg

Source: Edmond Ng

Source: Jelly Tse

Source: Anthony Kwan

Going through recent earnings calls, I’m also seeing a lot of positive commentary surrounding mainland Chinese tourism to Hong Kong. For example:

“The improvement was, of course, driven by Mainland China, our houses benefiting gradually from the reopening of the market. Hong Kong and Macao rebounded sharply.” - Jean-Marc Duplaix, CFO of Kering

“We saw also a big acceleration of tourism back into Hong Kong, Macau and even Thailand. So this is positive” - Nicolas Hieronimus, L’Oreal CEO

“A strong rebound in internal tourism, then the opening of Hong Kong and Macau and sometimes reporting a 3-digit growth in those 2 cities.” - Andrea Guerra, Prada CEO

“Revenue at DFS rebounded reopening of the China borders, although it still remains below 2019 levels. There was a progressive return of tourists to Hong Kong and Macau.” - Chris Hollis, LVMH Director of Financial Communications

“We are starting to see the impact of strong economic rebounds in Hong Kong and Mainland China.” - Georges Elhedery, HSBC Group CFO

“We see early signs of a strong rebound in business activity in Hong Kong and throughout Asia as travel fully resumed.” - Anna Manning, Reinsurance Group of America CEO

“The momentum started in terms of the visitors coming into Hong Kong. We saw a distinct momentum pick up in February. And that’s continued as we kind of progress through February into March.” - Anil Wadhwani, Prudential CEO

“We’re starting to see Mainland China volume increase in Hong Kong. And then international has just started to come back… so Hong Kong [is] doing very well.” - Josh D’Amaro, Chairman of Disney Park

“The key for Hong Kong is, obviously, the profits and revenues are up significantly because we were closed with COVID. There’s no restrictions. We’re now back to doing member intakes… So we’re feeling pretty good about Hong Kong” - Andrew Carnie, Soho House CEO

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2. Companies benefitting from the boom

2.1. Retailers

Hong Kong’s listed retailers are likely to be some of the main beneficiaries of more Chinese tourists to Hong Kong. These tourists will spend money on clothing, cosmetics, electronics, jewellery, wristwatches, snacks, alcohol, cigarettes and even over-the-counter-medicines.

But one factor is likely to hold back a full recovery to pre-2019 levels: Beijing’s crackdown on the “daigou” industry from 2019 to 2021. Since then, bringing products across the border to mainland China without paying tax has become a lot more difficult. So the daigou business is probably not coming back.