More Hong Kong restaurants shut down, shift to delivery as coronavirus dining ban poses existential threat

By Pearl Liu

/ SCMP |

July 29, 2020 5:01 PM SGT

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Restaurants in some of Hong Kong's main commercial districts are closing down as their owners opt to open kitchens in more affordable industrial areas offering only delivery services, according to property agents.

The growing trend " a result of the hardship caused by the coronavirus pandemic " is a further blow to the city's prime retail property market, and is set to accelerate as the latest social distancing measures include a ban on restaurant dining.

The complete moratorium on eating out is the "final straw" for some restaurants already battling to stay afloat, according to one analyst.

As eateries struggle to survive amid the lack of demand caused by Covid-19, many are now electing to make massive savings on rent by vacating their expensive premises in prime shopping zones.

"We see more catering businesses taking up space in industrial neighbourhoods, for example Kwun Tong. They are using the cheaper space as a kitchen to prepare food for delivery only," said Daniel Wong, chief executive of Midland IC&I.

"Rents can be brought right down, to just a third of what they previously paid for a restaurant in a bustling commercial area like Causeway Bay."

The situation will only be exacerbated by the latest, and strictest, set of government restrictions aimed at containing a third wave of Covid-19 infections sweeping the city. As of midnight on July 28, a recent ban on restaurant dining after 6pm was extended to include daytime hours as well.

"[Restaurateurs] do not need space for dine-in under the current situation after all. All they need is a kitchen and a delivery service team," Wong said. "Thus, we will see a surge of vacant [restaurant premises] in commercial districts like Causeway Bay and Tsim Sha Tsui."

Some 16,000 licensed eateries in Hong Kong have been hit hard by the Covid-19 pandemic, which prompted the government to implement the first round of social distancing policies in March.

The Hong Kong Federation of Restaurants and Related Trade forecast previously that the catering sector would lose HK$3 billion (US$387,085) in revenue in July from not being able to serve customers in the evenings. Total restaurant sales had already plunged 31.2 per cent year on year in the first quarter of 2020, amounting to a loss of HK$21.67 billion.

According to Openrice, an online restaurant guide, more than 250 Hong Kong restaurants went out of business in June alone.

"The new measure will be the last straw for some restaurants that are already struggling from the previous restrictions and an earlier ban on dine-in services after 6pm," said Oliver Tong, head of retail at JLL in Hong Kong. "They have to change and put more effort into delivery, or they'll go bust."

He believes that in future, up to half of a restaurant's revenues will come from delivery or takeaway services in Hong Kong, as the industry undergoes a fundamental shift amid changing habits caused by the pandemic.

A Deliveroo driver in Wan Chai. Photo: Nora Tam

"With their focus on delivery service, eatery owners will not need that much space for dine-in and locations no longer need to be at the heart of a bustling shopping area," said Tong. "We've already seen some landlords slashing up to 80 per cent off rents to keep their current restaurants or bar tenants."

Food delivery companies have seen a surge in interest from traditional restaurants and cafes wishing to steer away from their pure dine-in offerings.

"We have seen more inquires from restaurants wanting to join our platform over the past few weeks, and we expect this trend to continue as restaurants are seeing the benefits of the partnership and spread the word among their networks," a spokesperson for Deliveroo said.

The online food delivery platform launched breakfast services in Hong Kong on Tuesday morning, before the introduction of the all-day dine-in ban.

"It has been well-received by the restaurants as they are hoping to acquire more sales during the breakfast period," said the spokesperson.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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