Hong Kong darling Tsui Wah faces heat over higher prices and property purchase
Some customers are not bothered by HK$1 to HK$3 price increases, but another says he may switch to another restaurant if prices rise further
Local restaurant chain Tsui Wah has been the darling of Hongkongers for years, but price increases may have turned off customers and a proposed HK$255 million property purchase may have soured the appetite of minority shareholders.
The chain quietly raised the price of most of its menu items by HK$1 to HK$3 on February 1, which meant an increase of as much as 10 per cent for breakfast sets. It was the chain’s first price increase in 20 months.
This comes amid a tough retail and restaurant environment, with Tsui Wah’s revenue in Hong Kong falling 5.24 per cent in the six-month period ending last September on the same period in 2015.
“While the entire industry is facing similar challenges, we will nonetheless continue to strictly control costs and strive to expand our businesses,” a company spokeswoman told the Post.
But Tsui Wah’s price increases are “quite mild” and are inevitable to maintain service and quality in the face of rising labour and rental costs, according to Simon Wong Ka-wo, president of the Federation of Restaurants and Related Trades.
“[Restaurants] are also facing a lot of challenges [with] costs increasing, so they have to do something,” he said. “[But] I don’t see that there will be a big increase in pricing this year.”
Still, the slowdown in mainland China’s economy, uncertainty over US interest rate increases and a likely 10 per cent rise in retail rents this year will create challenges for restaurants, according to Wong.
“The year 2017 will be tough,” he said. “We expect there might be a slowdown in business at least in the current half year.”
Tsui Wah – with 63 restaurants in Hong Kong, mainland China and Macau – announced its intention last month to buy the Tsui Wah Group Centre in Kwun Tong for HK$255 million, a decision recently derided by a fund manager as “terrible.”
Pedro de Noronha, managing partner at hedge fund Noster Capital, wrote an open letter to minority shareholders on Wednesday slamming the purchase, countering company claims that the deal would improve financial performance, strengthen its brand name and bring returns.
“We cannot see the advantage of buying Hong Kong property at close to its all-time highs versus buying Tsui Wah shares at close to all-time lows,” Noronha wrote in the letter, obtained by CNBC.
Hong Kong’s sky-high property prices recently landed the city with the title of the world’s priciest housing market for a seventh year, according to a Demographia International affordability survey.
The company’s shares closed on Friday at HK$1.37, up slightly from their low point of HK$1.22 and well below their all-time high of HK$5.61.
The Tsui Wah spokeswoman said: “We strongly believe the proposed acquisition will help ensure the smooth operation of our [chain] as well as enable us to benefit from the possible value appreciation of the property given the fast development of Grade-A office buildings in the peripheral area in Kwun Tong.”
But for the average Hongkonger, the restaurant’s prices and quality are the concern.
Hongkonger Alan Lam eats at Tsui Wah once a week for lunch, and while he was unaware of the price increase, he said he may “go to other restaurants instead” if prices rise further.
Internet users have also chimed in to complain about the service and cost, with one Facebook user writing: “Tsui Wah – expensive prices and small portions.”
“Is Tsui Wah worth it any more?” another commented.
But some long-time patrons of the restaurant were unfazed by the price increases.
Customers Lewis Lam Ho-Wah and Martin Yu Kam-chiu, who have been eating at the chain for years, said they were not bothered by the higher prices.
Lam described the restaurant’s quality as “above average” as he enjoyed a curry dish.
“We love the food here and will bring our friends too,” another Tsui Wah customer, Wang Xiaohong, said. “Portions are big, so it’s worth it for the price.”
She and her husband, hailing from Guangzhou, have been Tsui Wah enthusiasts for six years. The chain is a must-stop destination when they travel to Hong Kong every three months or so.
The marginal price increase was “reasonable” given the quantity of food in each dish, Wang said.
The chain began as a simple bing sutt – a cafe offering iced drinks – in Mong Kok back in 1962 and grew into a restaurant staple, with the first Tsui Wah restaurant people are now familiar with opening in San Po Kong in 1989.