TL;DR: While Hong Kong's high rents are a well-known challenge, recent financial data from major listed F&B companies reveals a more significant operational expense: labor. With staff costs consistently accounting for over 30% of revenue—often double the impact of rent-related expenses—it's clear where the real pressure lies. To thrive in this demanding market, business leaders must shift their focus and strategically leverage technology to enhance productivity and optimize their workforce.
I am James, CEO of Mercury Technology Solutions.
There’s a common narrative that dominates almost every conversation about running a business in Hong Kong: the immense, often crippling, cost of rent. It's a challenge that has defined the city's commercial landscape for decades. However, I see differently:
"Hong Kong's rent isn't actually that expensive; the most expensive thing has always been labor. Bosses and employers really need to seriously think about how to use technology to cut manpower, especially in Hong Kong."
This statement, while direct, forces a crucial re-evaluation of where business leaders should focus their strategic energy. Is the anxiety over our leases distracting us from optimizing our largest and most complex operational expense? A look at the data suggests this may very well be the case.
A Data-Driven Reality Check: Analyzing the True Cost Structure
To move beyond anecdotes, let's examine the financial realities of some of Hong Kong's most prominent publicly listed Food & Beverage companies. Their reports provide a clear, empirical look into their cost structures.
| Company | Fiscal Period | Staff Cost Ratio (% of Revenue) | Rental & Related Expenses Ratio (% of Revenue) | Depreciation of Right-of-Use Assets Ratio (% of Revenue) |
|---|---|---|---|---|
| Café de Coral Holdings Ltd. | 6 Months ended Sep 30, 2024 | 34.0% | 11.7%* | Included within "Rental costs"* |
| Fairwood Holdings Ltd. | 6 Months ended Sep 30, 2024 | 36.3% | 0.9% | 13.5% |
| Tao Heung Holdings Ltd. | Year ended Dec 31, 2024 | 31.6% | 0.2% | 8.1% |
| Tsui Wah Holdings Ltd. | Year ended Mar 31, 2024 | 33.0% | 5.7% | Not broken down |
*Note: Due to HKFRS 16 accounting standards, a significant portion of "rent" is now reflected as "depreciation of right-of-use assets." For Café de Coral, the 11.7% figure is comprehensive. For others, a more complete picture of rent-related costs requires combining the latter two columns.
The data is unequivocal. For major operators like Café de Coral and Fairwood, staff costs consume a staggering 34.0% and 36.3% of all revenue, respectively. Even when accounting for the complexities of modern lease reporting, these figures consistently and significantly outweigh their total rent-related expenses.
This reveals a fundamental truth: while rent is a major fixed cost, the single largest operational expenditure for many service-based businesses in Hong Kong is, in fact, labor.
The Strategic Imperative: Optimizing Your Biggest Expense Through Technology
If labor is the biggest cost center, it also represents the greatest opportunity for strategic optimization. The suggestion to "use technology to cut manpower" should not be interpreted as a blunt call for layoffs, but as a strategic directive to enhance productivity, automate repetitive processes, and empower a leaner, more effective workforce.
Technology offers a powerful toolkit to achieve this transformation:
- Automating Core Business Processes: Implementing systems that automate routine back-office tasks in accounting, procurement, and human resources can free up countless hours, allowing your team to focus on higher-value activities.
- Streamlining Operations with Data: Utilizing data analytics can lead to more efficient staff scheduling, better inventory management, and optimized workflows, ensuring that your labor hours are deployed with maximum impact.
- Empowering Employees with Better Tools: Equipping your team with modern, integrated software solutions reduces manual work, minimizes errors, and allows a single employee to manage more complex tasks effectively.
- Leveraging AI and Intelligent Automation: From AI-driven customer service bots that handle common inquiries to intelligent systems that can automate reporting and analysis, technology can take on the repetitive tasks that consume valuable human time.
By focusing on technological solutions, you are not just trimming an expense line; you are fundamentally re-architecting your business to be more efficient, resilient, and competitive.
Conclusion
The challenge of high operating costs in Hong Kong is undeniable. However, the data strongly suggests that our collective focus may be disproportionately placed on the headline-grabbing cost of rent. The most significant, and arguably most manageable, operational lever for many businesses is labor productivity.
The most forward-thinking and resilient companies will be those that recognize this reality. They will shift their strategic focus from merely managing their lease to actively investing in the technology that transforms their operational efficiency and empowers their workforce.
Call to Action
It's time for every business leader in Hong Kong to ask a critical question: Are you spending more time worrying about your rent than you are investing in the technological tools that could revolutionize your single largest operational expense? The future of your business may very well depend on the answer.
