Skift Take

A reopening with mainland China would be a lifeboat for Hong Kong's beleaguered tourism industry. Talks seem to be escalating but hopes are kept in check as vaccine hesitancy for now serves as a real bummer for recovery.

Bubble weariness has set in for Hong Kong’s tourism industry. After a second postponement of a travel corridor with Singapore recently, businesses are skeptical that plans to restart cross-border travel with mainland China will happen soon. Deep down, however, they fervently hope it will.

The South China Morning Post reported on Friday that borders between Hong Kong and mainland China could reopen for quarantine-free travel as early as next month, likely with neighboring Guangdong for business travel first, then other market segments.

Guangdong is China’s richest province with the highest gross domestic product in the mainland for 32 years consecutively. Its nine cities, among them Guangzhou, Shenzhen, and Zhuhai, are part of the greater bay area. The area, which also counts Macau and Hong Kong, has more than 72 million people.

Details being considered include the number of cities in Guangdong in the pilot, if there should be a daily quota, and the length of a visit, said the report, citing a mainland official with knowledge of border-reopening discussions.

On the Hong Kong side, for a month now chief executive Carrie Lam has also intoxicated the industry about a “Come2HK” scheme that allows mainland Chinese who test negative for Covid-19 to visit Hong Kong without a quarantine. They may, however, still be subject to quarantine upon return if China decides so. Early last week, Lam said she would “press ahead” with discussions since the Covid situation in Hong Kong and China “has been stabilized.”

Mainland Chinese were 79 percent of Hong Kong’s arrivals in 2019. This wellspring of visitors has dripped to just 15,717 in the first four months, a bruising decline of 99.4 percent. A restart of any sort will jumpstart Hong Kong’s tourism recovery by leaps and bounds.

Hong Kong tourism players look wistfully to Macau, which has quarantine-free travel with China, and wonder when its turn will come. Mainland visitors to Macau were up 674 percent to 688,353 in March, over March 2020, Macau Statistics and Census Service shows.

“We see Macau [tourism] getting back to some normality. We should be next, but I just don’t see it in the next month or two,” said Jennifer Cronin, president of Wharf Hotels, which has hotels in Hong Kong and mainland China under the Marco Polo and Niccolo brands.

China Wants Zero

China appears to insist on zero local infections in Hong Kong in a month before borders could reopen, and stable conditions thereafter. Hong Kong was going without an untraceable local infection for 24 days but two new cases last week ended the streak.

“As we’ve seen, the Hong Kong-Singapore bubble was postponed twice. Taiwan, which has shown almost a year of good record in controlling Covid-19, now has an outbreak. In my view, 24 days without a local case is just a start to take the discussion on the table, although the Hong Kong government is trying very hard to make this happen,” said Anita Chan, CEO of Compass Edge, a firm that provides solutions for independent hotels tap China’s individual travelers.

Macau, on the other hand, has beaten the virus hands down, despite being the most densely populated Asian city. Since the pandemic began, it recorded 50 cases, zero deaths and now has virtually no new local cases.

With cases at levels the world at large would consider well under control, Hong Kong industry players are beating the gongs for locals to get vaccinated.

Unfortunately, vaccine hesitancy is high in the city, widely attributed to public distrust of the government and concerns over the safety of the two vaccines that have been approved, China’s Sinovac and Germany’s BioNTech. This worsened when the roll-out of BioNTech was suspended for 12 days in Hong Kong from March 24 after 50 vials were found defective.

Vaccine mistrust is so prevalent that the Hongkong and Shanghai Hotels, which owns The Peninsula Hotels and the Peak Tram, last week resorted to offering $258 (HK$2,000) cash to each of its 1,500 employees to get vaccinated. It also offers to cover the cost of pre-vaccination screening medical checks aimed at alleviating vaccine-risk concerns some of them may have.

“It’s entirely voluntary and we respect everyone’s choice whether or not to take the vaccine,” said Lynne Mulholland, director of group corporate affairs. “We hope for a take-up of at least 70 percent and we’re giving them until August 31 so hopefully we can reach that number.”

As of May 22, 17 percent of Hong Kong’s population of around 7.5 million has received the first dose and 12 percent are fully vaccinated. This compares with 35 percent and 25 percent respectively in Singapore, which has under six million people.

The mainland, meanwhile, aims to inoculate 40 percent of its population, or 560 million people, by end-June.

Most Important

“If we want travel to restart in any scale, we need to encourage people to get vaccinated. That’s the most important message we need to convey at this time,” said Simon Large, director of customer service for Cathay Pacific Airways, at Hong Kong Tourism Board’s annual industry update held online last week.

Cathay is operating at less than 4 percent of its schedule in 2019, said Large. A strong cargo business isn’t enough to stem losses, he said.

For recovery, the airline follows the herd immunity trail, i.e., which countries are likely to achieve it and anticipates flying to those places first. Currently, it expects to fly to Canada, UK, Japan, US, Australia, EU, Singapore, South Korea and China by yearend or early 2022. Malaysia, Taiwan, Philippines and Thailand are possibly next, in mid-2022, then Vietnam, India and Indonesia by the end of 2022 or early 2023.

Wharf’s Cronin also believes that it would be “next year earliest” that some borders would open between Hong Kong and the world. She expects Hong Kong tourism to be at 2019 levels only in 2024. However, “when mainland China opens, recovery will be faster,” she said.

The recent week-long May Day holiday can be a barometer for Hong Kong for when borders reopen with China, said Cronin. Wharf’s Niccolo hotels in China saw occupancies rise on average 16 percent, average daily rate 79 percent, revenue per available room 118 percent over — note this — the same period in 2019.

Likewise, Trip.com Group reported a May Day holiday this year that was actually better than pre-pandemic 2019. Bookings rose 30 percent over the same period in 2019. With China’s goal to accelerate vaccination, Trip.com Group’s chief marketing officer Bo Sun expects the May Day travel momentum to continue in summer and the week-long National Day Golden Week holiday starting October 1.

Will They Come?

“If we can open with mainland China, I really believe that’s going to help our business more than anything else, because they [mainland Chinese] do want to travel. They’re prepared to spend, and they won’t travel to countries around the world where they’re not treated with respect, particularly after the whole Covid messaging that was coming from the previous US administration. We’re getting the message from our client base in mainland China that they want to come,” said Cronin.

She dismissed notions that political developments might get in the way, saying “it’s absolutely calm now” after the 2019 protests and the introduction of the new National Security Law last year.

“Mainland Chinese people feel confident to come here now,” said Cronin.

Chan of Compass Edge however said it depends on the protocols, for instance, will there be quarantine upon return to China? Moreover, Covid-19 has catalyzed Chinese to discover their homeland and “the new challenge for Hong Kong is it has to compete with many Chinese destinations, such as Sanya for shopping,” said Chan.

The duty-free industry in Hainan Island, where Sanya is, has boomed since the pandemic. Last year, sales soared to some $5 billion, up 127 percent from 2019, according to the Hainan International Economic Development.

That said, should there be quarantine-free travel between Hong Kong and Guangdong, Chan believes Chinese in the province will come, due to proximity and special incentives that are expected to be launched by Hong Kong retailers, hoteliers, restaurateurs and attraction players.

Next Best Bet

With Asian countries fighting new waves of Covid-19 and more contagious variants, a corridor with mainland China is probably Hong Kong’s next best bet.

Hotels are surviving largely on staycations business, with designated quarantine business accounting for only about 1 percent of total room count, said Philip Schaetz, founder and managing director of Cube, which provides consultancy to hotel and travel businesses to optimize performance.

Hong Kong hotel occupancy averaged 52 percent in the first three months, versus 40 percent in the same period in 2020. But price was down to an average of HK$847, compared with HK$960 in first quarter 2020. It’s by no means a disaster, and speaks for the Hong Kong Tourism Board and the Hong Kong tourism private sector’s efforts to get residents to holiday at home.

“It’s interesting to see how Hong Kong hotels can stay afloat with the staycation concept and how big its local market can be during this Covid crisis,” said Chan.

But Cube’s Schaetz said this belies the challenge hotels face in balancing costs and maintaining quality service with staffing, purchasing, et cetera, as occupancies would swing up during weekend staycations, and down to as low as 10 percent on some days during weekdays.

That kind of yo-yo also pretty much sums up Hong Kong tourism’s recovery hopes.

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Tags: china, china outbound, coronavirus recovery, hong kong, macau, vaccinations

Photo Credit: Marco Polo Hongkong Hotel. Wharf Hotels

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