Via Financial Times

Almost two months after Hong’s Kong’s Disneyland theme park closed its gates, weeds are growing in the car park. At one of the resort’s hotels, the only parts of the complex that are still open, a pianist plays jazz covers of Disney classics to an almost empty lobby.

Around the corner, construction workers are labouring 24 hours a day to convert a plot of land into government quarantine facilities to house up to 600 coronavirus patients by next month.

The spectacle of Disneyland without visitors reflects the wider economic woes facing Hong Kong, which began grappling with the economic fallout of coronavirus weeks before the disease claimed its first victims in the US and Europe.

An international financial centre that also serves as one of Asia’s main tourist and transport hubs, the territory has been forced to ban all visitor arrivals from abroad in response to a second wave of cases.

The travails of its travel and hospitality sector offer a case study for countries in the west that are only beginning to feel the impact of coronavirus on their tourism industries.
In February, visitor numbers to Hong Kong plummeted 96 per cent compared with a year earlier, government data show — hitting an economy already weakened by the impact of the US-China trade war and anti-government protests in 2019. Hong Kong’s economy contracted by 1.2 per cent in 2019, the first annual decline in a decade. 

Line chart of Number of visitor arrivals (m) showing Tourists to Hong Kong plummet

Local businesses said the fallout from the virus had already far surpassed that caused by the problems last year. “The whole of [central] Hong Kong is like a dead city,” said Ricky Kwan, a tailor. He estimated his business lost 10 to 15 per cent of sales during the protests but 80 per cent in February. 

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Tommy Cheung, a legislator representing the catering sector, predicted 1,000 restaurants would close down during the protests. Now he said he expected that number to rise, adding that spending at restaurants last month was about 30 per cent of its usual level.

But the most visible impact of the virus has been on hotels across the city. Alex Tsui, chairman of the Hong Kong Hotel Employees Union, described the situation for the territory’s hotels as “chaos” with occupation levels dropping to 15 to 20 per cent or less.

This has forced them to lower their rates significantly.

Anthony Campagna, global head of fundamental research at ISS EVA, said that a sharp fall in people coming to the city could lead to a “race to the bottom” in which hoteliers offer rooms below cost.

Other businesses that rely on hotels — such as Rech in the city’s Intercontinental hotel, a restaurant fronted by Alain Ducasse, one of the world’s most celebrated chefs — have closed.

A worker sprays disinfectant outside the Hong Kong Disneyland resort in February
A worker sprays disinfectant outside the Hong Kong Disneyland resort in February © Paul Yeung/Bloomberg

Carlton Lai, an analyst at Daiwa Capital Markets, said that by the second half of the year smaller hotels would begin closing while larger chains with an international presence might survive.

He said hotels globally would be “looking to learn from Hong Kong’s situation”. The important lesson was to act quickly, such as closing down entire floors to reduce running costs.

As the global hit to consumption and hospitality worsens, other early measures that Hong Kong took to tackle the economic pain are now being proposed elsewhere.

In late February, the Hong Kong government announced a handout of about $1,284 to permanent residents to ease the financial consequences of the outbreak. In the US, Mitt Romney, senator for Utah, has proposed a similar policy.

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These responses are closely tied to fears over employment, an issue into which Hong Kong also provides an early glimpse. The city’s unemployment rate edged up to 3.7 per cent in the three months to the end of February, the highest level in nine years.

Line chart showing Hong Kong's seasonally adjusted unemployment rate since 1982. In February 2020, the unemployment rate has reached 3.7%, the highest level in nine years.

But unemployment in sectors related to consumption and tourism, areas that have been hardest hit by the outbreak, are almost twice that rate at 6.1 per cent over the same period.

Mr Tsui of the Hong Kong Hotel Employees Union said that while hospitality workers were asked to take unpaid leave in early February, job cuts were now picking up.

At Disneyland, which is mostly owned by the government but linked to an international brand, staff are still being paid despite the closure of the park.

Inside, renovations are taking place. “It’s pretty sad with no visitors,” said one worker trimming the trees that line the resort’s boulevards.

Additional reporting by Alice Woodhouse