Hong Kong braces for tourism "winter" as China visitors stay away

Tour groups to Hong Kong could shrink by as much as two-thirds in the first half of this year, an industry executive said, dealing another blow to retailers and an economy facing pressure from slowing growth in China.

China accounts for almost three-quarters of all visitors to Hong Kong, which relies on tourism for about 5 percent of its GDP.

Tourism numbers, however, fell last year for the first time in more than a decade and Ricky Tse, chairman of the Hong Kong Inbound Tour Operators Association, told Reuters he expects a further decline this year as the strong Hong Kong dollar continues to drive mainland Chinese to comparatively cheaper destinations such as Japan and South Korea.

"The drop will continue for sure. The winter has just begun," Tse said, adding that he expected the number of tours by Chinese visitors to fall by as much as 60 percent in the first half of this year after halving in 2015.

Government data shows tourist arrivals to Hong Kong fell 2.5 percent year-on-year in 2015 to 59.32 million, the first decline since 2003 when the city was hit by an outbreak of Severe Acute Respiratory Syndrome (SARS).

This decline has hit luxury retailers including Chow Tai Fook Jewellery, Cartier owner Richemont and Burberry Group PLC, with the latest available data showing overall retail sales falling for the ninth consecutive month in November, the longest period of decline in 13 years.

Chow Tai Fook, China's largest jewellery retailer by market value, said this month it will close 5-6 stores this fiscal year as tourism remains weak.

Brokerage CLSA report, forecast trips by mainland Chinese to Hong Kong and the neighbouring gambling hub of Macau to average 3 percent growth over the next five years, compared with 16 percent growth for all other markets.

"The move away from pure shopping trips is one of the main reasons that led to the slowdown in Hong Kong," CLSA said in a recent report. "Looking into 2016, we believe the trend will continue."