HONG KONG – Hong Kong’s efforts to revive its ailing retail and hospitality sectors are facing mounting headwinds, with some of the city’s top nightlife spots left deserted as residents flock across the border to mainland China for cheaper shopping and entertainment options.

Residents made more than 7.7 million departures in December from Hong Kong via land and sea ports, which are typically used to travel to nearby destinations like Macau and Shenzhen, according to data from the Immigration Department. That is the highest tally for the month since the government began reporting the statistics in 1984.

Almost half of the trips were made during weekends and the two-day Christmas public holiday, and more than 86 per cent of the departures were through borders between Hong Kong and the mainland.

Helped by the weakening of the yuan over the past year, Hong Kongers are spending their money on spicy hotpot, haircuts and indoor skiing, or stocking up at Walmart’s discount warehouse chain Sam’s Club.

Mr Ben Leung, founding president of the Licensed Bar and Club Association of Hong Kong, said: “In the past, we all looked forward to weekends and holidays because that was when business came in. Now, we dread weekends and holidays.”

It is a reversal of fortunes for Hong Kong, which at its peak saw more than 5.5 million mainland tourist arrivals in January 2019, with visitors splashing out on items from Louis Vuitton and Hermes handbags to cosmetics and baby formula. But the boom swiftly fizzled, first due to months of pro-democracy protests later that year and then three years of strict Covid-19 controls that saw tourism dry up.

The easing of virus restrictions early in 2023 was meant to herald Hong Kong’s big comeback as a world city. Instead, a raft of glitzy campaigns to lure visitors has fallen flat, with an economic slowdown in mainland China weighing on sentiment and local residents not picking up the slack. As well as neighbouring Shenzhen, the tax-free Chinese island of Hainan has been particularly appealing to Hong Kong and mainland consumers alike.

Hong Kong saw about 2.9 million arrivals from mainland Chinese visitors in December through all points of entry including airports, down about 43 per cent from 2018.

There has also been a notable change in spending habits, with visitors eschewing luxury shopping in the financial hub in favour of Instagrammable cafes or quirky streetscapes.

The city’s renowned nightlife has been hit especially hard. Many bars and nightclubs that stayed open overnight before the pandemic are now closing at about 2am due to a lack of customers, and the number of vacant premises in the popular Lan Kwai Fong area is increasing, according to Mr Leung.

The industry had expected a strong rebound once Covid-19 restrictions were lifted, predicting that sales would return to as much as 90 per cent of 2018’s level, he added. Instead, it has reached about 60 per cent, and business is not much better than it was during the pandemic, he said.

End-of-year festivities have offered little cheer. On Christmas Day, sales for restaurants in the city fell 19 per cent from a year earlier, while business on New Year’s Eve was down 10 per cent, said Mr Simon Wong, president of the Hong Kong Federation of Restaurants and Related Trades.

The latest official data shows a stagnant retail sales recovery, which peaked in April at 88 per cent of the 2018 level and was at 85 per cent in October. The government has not released data for the following two months.

“If we are not faring better than Covid-19 times, we are in trouble, because now we also face much higher rent and costs on labour and materials,” said Mr Wong. BLOOMBERG