Will boosting nightlife really save Hong Kong’s tourism industry and revive the economy?

The Hong Kong government has rolled out yet another campaign to stimulate consumption, focusing this time on the night economy. It is unclear where this idea came from, but officials have once again failed to address the structural issues of the city’s tourism industry and economy.

After three years of Covid-19 restrictions, Hong Kong is no longer a city that never sleeps: there are fewer people on the streets, and more restaurants and shops close early. The “ Night Vibes Hong Kong” campaign includes activities such as fireworks, night markets, evening transport fare subsidies and shopping perks, aiming to repair the damage. To most residents and tourists, the ideas are old-fashioned. When it comes to reviving the economy, the government is aiming at the wrong target.

While Hong Kong’s private final consumption expenditure has recovered in recent months, it only reached 99 per cent of pre-pandemic levels in the second quarter of this year, lower than the average of 107 per cent in Asian economies. The subdued night economy is only a symptom of a bigger problem, and it is about the lack of demand, not cyclically but structurally. There are three main challenges: a lack of competitiveness, changed consumer preferences, and shifting corporate strategies.

As an unintended but long-lasting consequence of Covid-19 policies, the development of Hong Kong’s consumption and tourism-related sectors has stalled. Meanwhile, regional peers are moving on and investing for the future. Hong Kong’s declining competitiveness and worsening cost-price ratio have made it less attractive to tourists, even as Hongkongers spend elsewhere in a post-pandemic wave of “ revenge travel”.

The emergence of social media platforms such as Xiaohongshu has allowed Hongkongers to get to know travel spots in other Chinese cities. The Greater Bay Area integration has benefited Shenzhen more than Hong Kong thus far, as more people travel to Shenzhen at the weekend than vice versa, encouraged by the streamlining of cross-border payments and transport, and lower prices on the mainland.

While it is unfair to blame the tourism sector for not investing when survival was the priority, the Hong Kong government and businesses appear unprepared for changed consumer preferences and spending habits. Tourists no longer seek a shopping-centric experience. With the well-developed e-commerce landscape and an increased pursuit of high-quality experiences, shopping has become merely one of many tourist activities.

The changing corporate strategies of global luxury companies have also hit Hong Kong’s retail sales. Given their more equal pricing strategies across markets and more localised and exclusive approach to selling products and engaging customers, Hong Kong no longer has the advantage in cost or availability, especially as more brands establish direct sales channels in mainland China. It means Hong Kong needs to offer more irreplaceable and diverse experiences to attract tourists.

As such, the push to revive the night economy may tick the boxes for government officials, but it will not solve any of the above problems. There is no quick way out and deep reforms are needed. The Hong Kong government must review its perspective of the consumption and tourism industry, and its policy mindset.

First, Hong Kong will need a more coordinated approach and clear road map across departments, instead of relying solely on the tourism board. Singapore, for instance, legalised hawkers to preserve the local food and drink culture, and some hawkers have even won Michelin ratings. It has also offered incentives for and supported big events, including the annual F1 Grand Prix.

Others make use of their cultural soft power. The South Korean government has a straightforward approach to supporting and exporting K-pop and K-drama, and promoting tourism. Japan has also struck a good balance between tradition and commercialisation, with government support. Unfortunately, Hong Kong has not done the same with its unique traditions and culture, and any marketing, funding or land use can still require cross-departmental cooperation.

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Hong Kong’s fading neon signs that once lit up the city’s night sky

Second, the government needs to stop throwing out ideas that make policymakers look like they all live in an ivory tower. The current campaigns are old wine in a new bottle, adding little to Hong Kong’s long-term competitiveness in tourism and offering few incentives for residents to spend locally.

Hong Kong must identify what makes it unique and seek to showcase this through heritage preservation and revitalisation, as a way of offering unparalleled experiences to increase the city’s attractiveness and stimulate consumer spending.

Several other Chinese cities have done a better job of preserving their heritage, from Macau’s mixed Portuguese culture to The Bund in Shanghai. Hong Kong does not even bother to protect its iconic neon signs, and the urban planning authorities do not appear to have given the preservation of local culture proper consideration.

To boost nightlife tourism, why not promote Hong Kong’s dai pai dong?

Third, the Hong Kong government must improve sentiment by offering attractive economic growth opportunities. Sloganising everything is no help. If Hongkongers do not feel they have better income prospects and do not experience any wealth effect, they are likely to continue to limit their local consumption, spending elsewhere if there are cheaper choices.

It was never about the night economy not flourishing. It was always about Hong Kong’s lack of competitiveness against its regional peers and poor consumer sentiment. Hong Kong is still attractive in many ways, but the government must address the root of the structural problems, rather than throw resources at random targets.

Gary C.Y. Ng is senior economist for Asia-Pacific thematic research at Natixis