One of DFS Group’s downtown duty free strongholds, Hong Kong, is going to see a -48% fall in arrivals from mainland China – with South Korea, Thailand, Japan and New Zealand mopping up PRC traffic instead.

According to data from market research group GfK – which is based on ‘on the book’ [ie actual] bookings for April through to September 2015 versus the same period last year – South Korea will see the highest rise in outbound PRC traffic at +85%. Thailand and Japan will see +60% and +50% respectively (see chart below and click to enlarge).

These three destinations will therefore consolidate their positions as the leading outbound markets in Asia Pacific for PRC Chinese, while New Zealand, currently in ninth place, will gain by +60%.

GfK also notes that Malaysia will suffer a -33% decline [hit by the two MAS flight tragedies] while Singapore will see a -15% fall in PRC travellers during the period. Singapore Changi airport has already reported weak overall traffic, down -0.9% in the quarter to March.

Hong Kong International Airport has seen better total traffic growth at +8.8% in the quarter, but downtown retailers are worried about the situation when it comes to their core Chinese shoppers.

‘STEEPEST DROP SINCE SARS’

Caroline Mak, Chairman of the Hong Kong Retail Management Association comments: “Hong Kong retail sales experienced a drastic drop of -14.6% in January 2015, the steepest slump in monthly retail sales since the SARS outbreak in 2003.”

But she acknowledges that sales in February were up +14.9% and that “this may be due to the fact that Chinese New Year fell on 19 February this year, while it was on 31 January in 2014”. Nevertheless, the first two months of 2015 still showed total retail sales down by -2% in value.

“At this moment, we must take into account all the unfavourable factors for this sluggish outlook, such as the economic slowdown and anti-corruption campaign in the Mainland, which have already had an impact on the spending patterns of Mainland tourists,” says Mak.

“Furthermore, we believe the weakening of the euro and yen have also discouraged tourists’ spending in Hong Kong. The recent protests against Mainland visitors had made the situation even worse.”

SHOPPING NOT SUCH A PRIORITY ANYMORE

More bad news for Hong Kong is that PRC Chinese travellers are no longer that interested in shopping destinations as they switch into locations that give them ‘experiences’ (see chart below and click to enlarge).

Hong Kong is still very much seen as a shopping haven, based on a GfK survey of 1,000 PRC travellers, but scores low on culture and history. Thailand scored highest for these latter two categories.