The Hong Kong hotel industry has seen a strong occupancy rate during the the National Day “golden week” holiday, according to South China Morning Post. Meanwhile hotels in the city are expected to enjoy a strong average room rates growth this year.
JLL’s Hotels & Hospitality Group said Hong Kong will be the fastest growing hotel market in Asia in 2018 – strong visitor demand fundamentals and relatively few additions to hotel supply are the reasons behind the phenomenon, according to a press release of JLL.
Hong Kong Tourism Board’s figures showed that overnight arrivals to Hong Kong grew 6.2% and Hong Kong’s market-wide revenue per available room (RevPAR) grew 13% year-on-year to HK$1,214 in the first half of 2018. The trend of growth is expected to continue through the year.
JLL said the industry could be optimistic about the outlook of tourist arrivals and RevPAR growth as the market stands to benefit from the completion of the Hong Kong-Zhuhai-Macao Bridge and Guangzhou-Shenzhen-Hong Kong Express Rail Link this year. The new transport links will facilitate additional travel to Hong Kong and boost demand for hotels.
Currently Hong Kong has about 80,000 hotel guest rooms. The compound annual growth rate (CAGR) of new hotel supply in Hong Kong is expected to be 2.4% between 2018 to 2022, lower than the long-term annual growth rate of 4.3% during 2007 to 2017. This figure decreases the likelihood that a glut of new hotel openings would reverse the recent trend of growth in the market.
JLL’s Hotels & Hospitality Group’s senior vice president David Marriott said as hotels are generally a high fixed-cost business, increases in revenue typically lead to even greater increases in profit. As a result, hotel owners can expect to enjoy strong profit growth in the coming years.
“While we are projecting growth across all segments, we expect that growth will initially be higher in the budget/mid-scale segment versus the upscale/luxury segment. Hotel owners looking to best capitalise on this growth should be focused on active revenue and channel management as well as ensuring their properties are well-maintained,” commented Marriott.
The thriving industry and its investment potential have also been attracting investors to jump on the bandwagon. The market has recorded 17 hotel acquisitions since 2017, amounting to a total transaction volume of HK$15.72 billion.
“While some investors have acquired hotel properties for conversion of use, the trend of hotel fundamentals show there is also a strong investment thesis for owning hotels in Hong Kong. As a result, we expect hotel investment to remain active in the coming 12 months,” concluded Corey Hamabata, senior vice president of JLL’s Hotels & Hospitality Group.