Hong Kong’s Crown Super Deluxe has opened its doors during the Covid-19 pandemic.

The new Japanese teppanyaki grill restaurant, in the centrally located bar district, saw most of its seats filled after the government eased social-distancing restrictions and moved the city another step closer to normality.

“On the one hand, we don’t have people coming into Hong Kong, but we also don’t have people going out of Hong Kong,” said Christopher Mark, founder of Black Sheep Restaurants, which operates the grill. As virus-beating restrictions lift amid Hong Kong’s low and stable case-count, Mark says he’s “a little bit more optimistic.”

A captive audience for Hong Kong’s hotels, restaurants and shopping malls has likely sparked a modest uptick in retail sales in May and June of 2020, with pent-up demand among the city’s residents for food and entertainment unleashed. Yet concerns remain that the city’s battered tourism industry will not see business coming back to pre-downturn levels, and many wonder how long this current resurgence can last as unemployment rises and some expats leave the city.

Hong Kong has had three straight months of retail sales declines greater than 35% and tourist arrivals fell 99.9% in both April and May as strict quarantine orders on the vast majority of arrivals remain in place. The city’s wider economy contracted 8.9% in the first quarter from year-ago levels, suffering its worst quarter on record and extending the first recession in a decade.

A major obstacle to a real recovery remains worries that the millions of Chinese tourists that used to visit per month won’t return to Hong Kong even after the virus subsides. Anti-China protests have reignited since Beijing pushed ahead on a new national security law last month.

“Specifically for hotel accommodation and other tourism activities, they can only experience a turnaround when the quarantine is relaxed, not only in Hong Kong but in most major cities worldwide,” according to Iris Pang, chief economist for greater China at ING Bank NV.

Some signs are emerging that smaller businesses are more optimistic about their short-term prospects. May readings for the outlook among smaller retailers and restaurants in the city rose above the 50 level marking favorable business conditions for the first time since at least 2018 and that for restaurants hit a record at 53.6, according to data from the Census and Statistics Department Hong Kong.

Shoppers in Hong Kong are returning to the malls, said Ada Wong, chief executive officer of the Champion REIT real estate firm.

“We are seeing a very good and encouraging retail sentiment especially after the relaxation of social distancing,” Wong said in an interview on Bloomberg Television Friday. Foot traffic in the Langham Place mall in Mong Kok is almost back to normal — with just the tourists missing, according to Wong.

Still, retailers — especially of luxury goods — are worried that the uptick could be fleeting.

The Bluebell Group, Asia’s largest distributor of luxury brands including Versace and Moschino, has seen some recovery in business in Hong Kong, yet it is still in deep contraction. Sales for the company’s portfolio of luxury brands were still down 50% in May and June of 2020 compared with last year in Hong Kong, an improvement of a 70% drop in previous months.

“We are a bit scared that what we’ve seen in May and June might not hold for too long,” said Managing Director Samy Redjeb, “It could be one-off because consumers want to enjoy the promotion and the discount and they might not come back regularly every month.”

In the hospitality sector, Google trends data show that searches in Hong Kong for the word “staycation” recently surged to a record high. Hotels are capturing the demand. A Hyatt hotel in the tourism hotspot Tsim Sha Tsui is promoting its summer staycation package. For a king-bed deluxe room on a Friday night, the rate is HK$1,380 ($178) including a two-person breakfast and an additional HK$1,000 dining coupon.

“As tourists are virtually zero, hotels are trying to attract local customers by providing promotion packages of stay plus meal,” said Yiu Si-wing, a Hong Kong lawmaker representing the tourism industry. “Hotels can’t charge any higher. Without such a discount, people won’t show up.”

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