Colliers today released its Looking Beyond: Trends & Opportunities in Hồng Kong’s Hôtel Environment report, which reviews Hong Kong’s hotel performance and operating environment, and explores trends and opportunities for owners, operators and investors.

Shaman Chellaram, Senior Director, Valuation & Advisory Services | Asia, commented: “Even though Hong Kong’s hotel operating environment remains challenging, staycation demand, quarantine hotels and extended-stay offerings have helped boost performance. Major infrastructure, commercial and leisure initiatives will elevate Hong Kong’s position as a global city and provide further long-term potential. New and existing operators can expand their presence in the market by partnering with existing owners or investors, while also considering the adoption of technology, asset enhancements and ESG initiatives.”

Hotel performance has improved moderately as a result of domestic demand

Lack of mainland and international visitors due to Hong Kong’s stringent quarantine measures and cross-border restrictions continue to weigh heavily on the sector. Average occupancy and RevPAR are up 49% and 57%, respectively, YTD but still significantly below 2018 highs. The luxury sector continues to lag in terms of occupancy, but the further easing of F&B and banqueting restrictions is starting to contribute to improved revenue. Midscale and upscale hotels are achieving higher occupancies, largely as a result of longer-stay guests and rate drops. While the anticipated partial opening of the border in December will be welcomed, the sector needs a wider opening to make a meaningful difference.

Opportunities for partnerships and flexible models emerging in sector

COVID-19 has provided some opportunities to enter the market, acquire, enhance or reposition assets with new and existing hotel brands. The adoption of technology will be key going forward as health and wellness become increasingly important to guests. Colliers also recommends partnerships with groups looking at flexi-stay, extended stay, and co-living models as a way to improve shorter-term performance, share risk and provide experiential offerings. Hotels and guesthouses may now be used as interim accommodation for those on the public rental housing waitlist as part of the government’s ‘Use of Hotels and Guesthouses for Transitional Housing’ pilot scheme, with over 150 hotels and guesthouses already on the initial list. Integrating ESG initiatives is also becoming a strategic priority for many hotel groups, with green financing and sustainability-linked loans already emerging in the sector.

Hotel outlook remains positive although recovery likely to be slow

Despite COVID-19 there have been over 10 new hotel openings in 2020-2021, with more hotels expected to open in 2022 and beyond. Transaction levels remain muted at HKD 1.7 billion as of Q3 2021; however, this is likely to approach HKD 3 billion by year-end. Comparatively, investment levels in 2020 were HKD 1.3 billion. Investment appetite for Hong Kong hotels remains strong, with ample capital from PERE funds and private investors waiting for the right opportunity, but underwriting, forecasting and differences in pricing expectations are key challenges. Aligning with the right partner is key.  Several infrastructure and leisure projects across Hong Kong provide a picture of how the city will evolve over the coming years; the improved connectivity with the Greater Bay Area and across the city will drive accessibility, and despite the current difficulties, the potential benefit for the hotel sector is evident.  

For a copy of the report please contact the primary author Shaman Chellaram, Senior Director, Valuation & Advisory Services | Asia or download below via the contact details.

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