Chinese tourists from mainland China who spend large sums of money

Now, when it's time to update contracts for this year, Chow Tai Fook Jewelery Group Ltd. Achieves a 20 percent discount on rental for some of its stores in Hong Kong, as sales of luxury goods in the city plummeted.

The company this year has already received a rent reduction of 10 -20 percent for some of its stores compared to the contracts for the previous year, said Kent Wong, managing director, without specifying the number of stores. He said that the extension of contracts in 2015 concerns about 30 of its branded stores in Hong Kong.

This year is "very special when we can negotiate with real estate owners," Wong said in an interview on May 8 in Hong Kong. "For us the driving force is demand; We expect that we will be able to get a 20 percent reduction in rent. "

Rent for retail stores in Hong Kong is falling, as the weakening of China's economy and its fight against corruption and waste have limited consumer spending. Affluent Chinese also choose other routes for travel. In March, the city experienced the first decline in visitors since June 2009, when sales of jewelry, wrist watches and other watches also fell for the sixth consecutive month.

Chow Tai Fook's comparable store sales in Hong Kong, Macao and other markets slipped 26 percent in the three months ended March in the year-ago quarter and fall for the fifth quarter. The company may close one or two stores in Hong Kong this year, including a branch in the Peak area, Wong said.

Shares of Chow Tai Fook fell 0.2 percent to HK $ 9.32 on the trading session at 10:25 in Hong Kong.

Opportunities for reducing

"Typically, rent of prestigious retail places in Hong Kong is hard to get by nature," said Catherine Lim, an analyst at Bloomberg Intelligence in Singapore. - For a retailer, this is still an attractive location for creating a brand. When renting not the most prestigious places, especially shops on ordinary streets, there may be more opportunities for lower prices. "

Chow Tai Fook, the world's largest registered jewelry company, has about 90 points of sale in Hong Kong, and almost half of the proceeds come from Mongkok and Tsim Sha Tsui, shopping areas popular with Chinese tourists.

Economists from Daiwa Capital Markets forecast a 4% drop in retail sales in Hong Kong this year compared to 2014.

Renting retail space in the city's four leading shopping areas fell 3.5 percent on a quarterly basis in the first three months of this year, according to a report released by Colliers International last month. It predicts that the rent of stores located on ordinary streets will drop another 9 percent in 2015, and there will be many free stores.

Overseas Chinese

Although the company has no plans to expand operations in Hong Kong this year, Wong does not rule out the possibility of opening a store if they can find a prestigious place with good rental conditions.

Wong said that after the opening of his first store in September, the company is considering increasing points of sale in duty-free shops in South Korea to reach Chinese tourists from mainland China who spend large sums of money.

Protests in Hong Kong against tourists from mainland China can redirect more Chinese to Korea and other places, wrote Cara Song, an analyst at Nomura Holdings Inc. in April.

This year, the growth in the number of tourists from mainland China will be reduced by half to 8 percent, according to the Hong Kong Tourism Board. Korea expects 18 percent more Chinese this year, according to Bloomberg Intelligence forecasts.

http://www.bloomberg.com/news/articles/2015-05-12/chow-tai-fook-seeks-20-discount-in-hong-kong-shop-rents-in-2015-i9lsy5r5