Hong Kong businesses survived the city's protests. Coronavirus pandemic may be their breaking point

HONG KONG — On a weekday morning in the ground floor mall of Hong Kong’s International Finance Center, office workers dressed in business attire are sparse but not uncommon, as shops ranging from Hugo Boss to Gucci prepare to open their doors.

While it may look relatively desolate for a place like Hong Kong, where thousands of morning commuters are usually seen rushing during peak hours, the subdued activity in the Asian financial hub is already considered a rare sight. In the midst of the coronavirus pandemic, cosmopolitan cities like New York and London have been virtually locked down and streets are empty, but Hong Kong has managed to avoid a complete lockdown even though there’s been a steady rise in cases over several months.

Hong Kong reported its first coronavirus case on Jan. 23. Despite the city’s high density and a population of more than seven million, it has recorded 914 cases of coronavirus to date, according to data from Johns Hopkins University. By comparison, that’s less than half of the 2,100 confirmed cases in Finland, which has a population of around 5.5 million.

Still, more and more restrictive measures have been in place. Many employees have already been working from home and schools have been suspended, but restaurants and bars have mostly operated as usual — at least until recently.

A surge in coronavirus cases in late March, driven by the return of residents from Europe and the U.S., has spurred new government measures, including a ban on foreign visitors, a two-week closure of gyms and bars, and a capacity limit of 50% at restaurants.

Many businesses were hoping the city would return to normal again after nearly one year of social unrest, followed by months of the coronavirus outbreak. But the new wave of cases and subsequent government regulations that followed have dealt another devastating blow for business owners like Imran Shawkat.

“Our costs are so high and we keep losing business and money since last July,” the cofounder and managing director of Al Dente Group, which runs six restaurants in Hong Kong, told CNBC by phone. It’s been the most challenging time in his 19 years since starting the business, he said.

Shawkat said restaurant sales have plummeted about 70%, starting with the slowdown last summer when more people stayed indoors and tourists arrivals fell drastically over safety concerns in Hong Kong due to the social unrest. 

“We sent an email to the landlord for help. We asked for one rent cut for the month of April,” Shawkat said, adding that he was still waiting for a response.

In February, Hong Kong’s government announced more than $15 billion worth of measures to help a battered economy that was already reeling from the impact of pro-democracy protests. 

According to Hong Kong Monetary Authority, close to 9,000 applications from small- to medium-sized businesses have already been approved for relief loans or repayment terms, worth more than $57 billion Hong Kong dollars (nearly $7.4 billion).

Shawkat said he had received 200,000 Hong Kong dollars ($25,800) for each of his restaurants last month, but that will hardly help. Besides, the relief measures were announced before the government’s most recent guidelines which imposed further social distancing measures that include restricting crowds in restaurants.

On March 27th, Hong Kong’s Chief Executive Carrie Lam asked restaurants to cut capacity in half, limit gatherings to four people, and require tables be five feet apart. Meanwhile, establishments that tend to draw large crowds, like cinemas and gyms, were asked to close for 14 days. 

Shawkat’s Italian restaurant, Al Dente, seats no more than 28 people in a small space. He said turning a profit would be nearly impossible at half capacity, and decided to shut the restaurant down for now.

“We hope everything goes back to normal and we reopen,” he said. “We thought we can survive. We were hoping it would go away but then this government social distancing started.”

Meanwhile, in Hong Kong’s nightlife district, Lan Kwai Fong, signages that urge customers to drink responsibly have been replaced by signs to “wash your hands” and “wear face masks.” The industry has come under pressure as more than 60 coronavirus cases have been linked to bars in recent weeks.  

Late last week, establishments mainly used for the sale of alcohol were mandated to close for at least 14 days, which has presented new challenges for bar owners like David McEwan.

“Last year was a bad enough of drain, the last couple months were hard, but the last weeks around the ambiguity has caused more fear to the customers and the workers,” said McEwan, owner of Bobby’s Rabble, a bar in Hong Kong’s central district.

He closed the bar last Friday for two weeks, in compliance with government mandates. But before that, all his staff were already wearing masks and gloves as customers were required to have their temperature checked before entering the venue. Even then, many of his customers were already staying home even before the outbreak, he said.

“I don’t think we’ll be shut for more than a month, but whether we or other businesses are strong enough to survive that, is another matter,” he said.

McEwan said he’s asked his landlord for some relief and is now considering breaking the lease early and moving to a smaller, less expensive location. He’s been hosting online cocktail classes and online quiz nights to stay connected with his customer base.

“You could feel the sadness in the air when you go to the restaurants,” said Vivian Gu, a food blogger and Hong Kong resident of more than five years. She often ate out more than five times a week — even during social unrest, but recently change to eating out only once a week.

“Since the protests, tons of restaurants have been closed,” she said. “How can they withstand six months plus of hardship? Overhead is so expensive, rent. I can’t see Hong Kong sustaining all of this.”