Hong Kong slips one place to fourth most expensive city for luxury spending as hotel rates take a huge hit from pandemic, Julius Baer report finds

Hong Kong loses third place to Taipei as a plunge in hotel rates undermined average luxury lifestyle costs
Shanghai, meanwhile, cemented its place at the top of the table with a 38 per cent increase in hotel prices as domestic tourism rebounded

Hong Kong economy

David Ren

Published: 10:09am, 15 Jun, 2022

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Hong Kong has slipped one place to become the fourth most expensive city on the planet for luxury goods and services, according to a report released by Swiss private bank Julius Baer on Wednesday.

A sharp drop in hotel room prices as the pandemic barred the way for big-spending foreign tourists dragged the city down below Shanghai, London and Taipei.

Hong Kong’s hospitality industry suffered a 39 per cent fall in average hospitality prices as the ferocious fifth wave of Covid-19 kept visitors at bay this year.

Shanghai, meanwhile, cemented its place at the top of the table with a 38 per cent increase in hotel prices as mainland China’s domestic tourists numbers expanded 12.8 per cent last year.

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“Hong Kong hotels and a lot of other services have lacked external demand because of the strict anti-Covid measures,” said Kenny Ng, an equity strategist in Hong Kong at Everbright Securities International. Ng said the decline of tourists from mainland China was the main reason Hong Kong’s hotel sector is in the doldrums.

The Global Wealth and Lifestyle report by Julius Baer tracked changes in the cost of luxury living for high-net-worth customers, based on data collected between November 2021 and April this year.

That included the period when Hong Kong was hardest hit by the highly infectious fifth wave of the coronavirus, but came before Shanghai went into full-scale lockdown for two months.

The annual report, the third by the Zurich-based private banking group, compared the prices of 20 goods and services in 24 major cities. It looked at the prices of whisky, women’s designer handbag and business class flight, among other things.

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On average globally, three quarters of goods prices and 63 per cent of services prices had increased since the last report, under the effects of considerable inflation rates.

The average price of whisky, for example, surged more than 27 per cent on average compared to the same study a year ago. The largest increase was seen in Shanghai, where the cost of a good bottle of the spirit shot up by 85 per cent. At the other end of the scale, Manila saw the price of whisky drop by 15 per cent.

According to the league table, Asia, led by China, is the most expensive region for high-end spenders while the Americas are becoming more affordable.

“Asian cities remain dominant, holding six of the top 10 places, but their continued supremacy in our rankings is not guaranteed,” said Nicolas de Skowronski, head of wealth management solutions, in the report.

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The long-running Covid-19 pandemic, along with supply chain disruptions and macroeconomic conditions, had lifted the price of three quarters of goods and services in the lifestyle index, he said.

At the other end of the scale, Tokyo saw the biggest drop in luxury prices as the yen depreciated sharply against the US dollar. The Japanese capital plunged down the rankings from second to eighth place this year.

The current exchange rate of 134.60 yen to the US dollar is 14 per cent lower than at the beginning of the year.

“The need for investors to take action, together with their wealth managers, to protect their purchasing power and preserve the value of their assets is clear,” said Skowronski.

“As the findings of our lifestyle index show, the cost of living will continue to rise,” said Christian Gattiker, head of research of Julius Baer, in the report.

“[How much it rises] is based on where they live, the products and services they buy, and even their interests. Combining these with a good wealth management strategy can help stem this erosion, and preserve and even grow wealth under the current conditions.”