Mainland Chinese shoppers not the only market for Hong Kong retailers

A 30-year veteran with Hongkong and Shanghai Hotels group, Martyn Sawyer - who oversees the non-hotel properties - says the downward pressure on retail rents is a short-term hiccup

PUBLISHED : Wednesday, 08 July, 2015, 12:00am
UPDATED : Wednesday, 08 July, 2015, 12:00am

Martyn Sawyer, aged 58, is responsible for Hongkong and Shanghai Hotels' non-hotel properties and operations including The Repulse Bay Complex and The Peak Complex in Hong Kong, as well as management of properties and clubs in Hong Kong, Vietnam, Thailand, France and the UK.

He has been with the group since 1985. He was appointed group general manager for properties and clubs in 1999, made a member of the group management board in 2002 and was promoted to group executive and retitled as group director for properties in 2013.

Sawyer is an avid sportsman and veteran of nine Racing the Planet 250 km ultra marathons, and will be taking part in this year's Ecuador race from July 26.

He is committed to raising much-needed funds to enable Camp Quality Hong Kong to continue helping children with cancer in the city. His persistence and perseverance has helped Camp Quality Hong Kong raise more than HK$1.5 million.

Average monthly rents at your shopping arcades dropped for three consecutive quarters to HK$206 per square foot in the first quarter, after hitting a record HK$210 per sq ft in the third quarter last year. Was the fall due to the decline in spending by mainland tourists?

The first quarter data is difficult to see the full picture as the average retail rents represent all our shopping arcades in The Peninsula Hotel in Hong Kong; Shanghai, Beijing; Tokyo and the retail arcade at The Peak Complex. All are very different markets. The occupancy rate at The Peak Complex is fully let and the rent continues to increase. But of course, we have also been affected by the weakening sales from Hong Kong.

Will any of your retail tenants ask for rent reductions amid the slowdown in consumer spending on luxury items?

We have no intention of reducing rents in our portfolio and no tenants have asked for rent cuts. Yes, there is a weakening in Hong Kong hotel business as room rates dropped four per cent to HK$3,832 per night in the first quarter this year. But we are confident it is a short term hiccup and we will see a positive uptrend in the end. Our tenants know the value of being in The Peninsula Hotels.

Mainland shoppers account for what percentage of the firm's retail business?

Mainland tourists are important to every retailer in Hong Kong but it is certainly not the only spending group. I think people seem to get the impression that the tourists visiting Hong Kong will only be Chinese and it may be untrue. Sure, we have seen tremendous increase in the Chinese middle class and they now have more disposable income, they are young and they want to travel. But it is not our only market.

Retailers are dealing with huge markets from many parts of the world. We still have a huge number of visitors from America, Europe and Southeast Asia and Russia.

Certainly, the firm's first quarter operating figure showed a decline in rents … but we are looking at a very long term view. The results of the first quarter were down, and the results of the second quarter may increase but it does not tell the trend.

I know retailers are suffering but they also understand the value of having a store in our hotel rather than a huge outlet in Canton Road. They certainly are keen to continue the relationship with our hotels as we provide more personal service to our tenants.

Average residential rents grew 8 per cent to HK$92 per square foot in the first quarter, according to the firm's figures. Can you give an update on the luxury residential leasing business?

Our luxury residential development The Repulse Bay Hong Kong contributes a significant part of our business. Its occupancy rate stands at more than 95 per cent with rents still growing.

What are the tenant profiles at The Repulse Bay Hong Kong?

Most of them are professionals from financial services, retail, pharmaceutical and international corporations.

Any tenants from the mainland?

Yes, plenty of them, and they are growing as well. They come from the mainland to work for big financial houses.

As the company is building residential projects overseas for sale, will The Repulse Bay on the selling list?

No.

Have any of the tenants wanted to buy units after staying for two or three years?

Yes, some of the tenants want to buy but we will not consider selling the property. Most of our tenants stay at least two tenancies and some even stay for 20-plus years.

What is the importance of diversifying the hotel business to other property investments?

Hotels are our core business, and we have residential, commercial and retail facilities that give us some balance. Sometimes, the hotel business is very strong and sometimes not so strong, and the industry can change overnight. But the residential and retail portfolio will have much lower change as the leases usually last for two to three years. It can support the company when the hotel market is not so strong.

As a veteran runner, how do you train to keep up for the ultra marathons?

I'm a trail runner. Hong Kong is a wonderful place for trail running. In the country side, it is very hilly and very challenging. I do my long running on Saturday.