Expanding the Individual Visit Scheme: Driving Growth in Hong Kong's Retail Industry

Commencing on 27th May, eight additional cities within the Chinese mainland have been granted eligibility to issue individual travel endorsements, facilitating trips to the Hong Kong and Macao Special Administrative Regions.

The new cities are Taiyuan in Shanxi Province, Hohhot in the Inner Mongolia Autonomous Region, Harbin in Heilongjiang Province, Lhasa in the Tibet Autonomous Region, Lanzhou in Gansu Province, Xining in Qinghai Province, Yinchuan in the Ningxia Hui Autonomous Region and Urumqi in the Xinjiang Uygur Autonomous Region. The scheme now covers 59 cities, including all provincial capitals and capital cities of autonomous regions in the Chinese mainland.

The anticipated expansion of the Individual Visit Scheme (IVS) is expected to attract a greater number of high-value-added overnight visitors to Hong Kong. The Hong Kong Special Administrative Region (HKSAR) has been actively promoting tourism in relevant cities and collaborating with the trade to enhance the competitiveness of Hong Kong's tourism industry. By fully exploring the city's abundant tourism resources and drawing on successful experiences from other regions, innovative thinking and optimized policies are being implemented. The HKSAR has announced a calendar of mega events for the second half of 2024, projecting around 210 events throughout the year. Efforts are being made to continuously improve service quality and foster a welcoming environment for tourists, solidifying Hong Kong's position as a premier tourism destination.

According to the Quarterly Survey of Employment and Vacancies conducted by the Census and Statistics Department, the number of establishments in the retail industry for jewellery, watches, clocks, and valuable gifts increased by 3% in December 2023 compared to December 2022, totaling approximately 3,600 establishments. The number of establishments in the medicines and cosmetics sector remained stable at over 4,000 during the same period.

On the demand side, data from the Census and Statistics Department and the Hong Kong Tourism Board (HKTB) reveals that in 2023, the total value of retail sales in Hong Kong amounted to $406.6 billion, with visitor spending on goods reaching $71.3 billion, accounting for approximately 18% of the total retail sales value.

Furthermore, the latest departing visitor survey conducted by the HKTB indicates a shift in factors influencing Mainland tourists' visits to Hong Kong. While shopping remains a significant draw, the proportion of tourists primarily coming for shopping purposes has gradually decreased. However, Hong Kong's price advantages for luxury goods, combined with its fashionable style, good quality, and authenticity guarantee, continue to make goods in the city popular among Mainland tourists.

In May, the retail market in Hong Kong exhibited signs of improvement, with increased trading activities and a total of 99 registered transactions—an uptick of 16.5% compared to the previous month. The total registered value also witnessed significant growth, reaching approximately HK$2.38 billion, reflecting a month-on-month increase of approximately 91.2%.

Despite a less-than-ideal local retail market, relatively low rents have reduced merchants' operating costs. This has heightened merchants' interest in renting and opening shops, particularly in the four core areas of Hong Kong.

Recent transactions highlight the strong demand for food and beverage (F&B) establishments in the local market. For instance, a Japanese restaurant leased a ground shop at No. 217 Fa Yuen Street, Prince Edward, with a saleable area of approximately 955 sq. ft. The renewal rent increased by 6% to HK$95,000 compared to the previous rent of HK$90,000 on 16/11/2022. Similarly, a Hotpot restaurant leased ground shop A and B of Yee Fung Building, 207-209 Fa Yuen Street, with a saleable area of around 1,365 sq. ft. The renewal rent of HK$176,000 represents a 10% increase from the previous rent of HK$160,000. These renewals indicate the strong demand for F&B establishments in the local market.

Presently, the duty-free allowance for imported items for personal use by Mainland visitors (including visitors to Hong Kong) stands at RMB 5,000 per travel, as per relevant Mainland customs laws. The government intends to engage with relevant Mainland Authorities to explore policies and measures that foster Hong Kong's tourism development, such as increasing the duty-free allowance for Mainland visitors. This is expected to enhance their consumption intentions, boost local consumption, attract more high-spending overnight visitors to Hong Kong, and stimulate further growth in the retail market. It is predicted that retail rents will experience growth in the coming months, thereby attracting more investors to allocate capital to retail shops.