Visitor decline slows hotel development in Hong Kong

Hong Kong

Amid a shaky economy and a downturn in tourism, plans to turn old industrial buildings into hotels in Hong Kong are being abandoned by developers. Currently, about half of these planned hotels are actually in development, while the remainder sit empty. 

Until the economy and the country's tourism numbers improve, owners of these former industrial buildings will likely suspend or abandon their redevelopment plans. Rising construction costs are also an important factor in delays, Charles Chan, a managing director at real estate company Savills, said.

According to the Development Bureau, 21 hotel redevelopment projects have been approved following the government’s six-year industrial revitalization campaign that ended in March. Of these, 10 are either under construction or have been completed. Five projects were "scrapped" for hotel purposes (costing Hong Kong 1,400 hotel rooms) and the remaining six have been left untouched. 

Virtual Event

HOTEL OPTIMIZATION PART 2 | Now Available On-Demand

Survival in these times is highly dependent on a hotel's ability to quickly adapt and pivot their business to meet the current needs of travelers and the surrounding community. Join us for Optimization Part 2 – a FREE virtual event – as we bring together top players in the industry to discuss alternative uses when occupancy is down, ways to boost F&B revenue, how to help your staff adjust to new challenges and more, in a series of panels focused on how you can regain profitability during this crisis.

Vincent Cheung, executive director for valuation and advisory services in Asia at Colliers International, said that owners are more likely to sell their abandoned sites than proceed with the hotel development, although he did not discount a market change boosting the appeal of new hospitality projects. 

Development Challenges

In 2015, the number of global visitors to Hong Kong reached 59.3 million—a decline of 2.5 percent from 2014. In the first quarter of 2016, the decline worsened, with arrivals dropping more than 10 percent year-over-year. 

William Cheng Kai-man, chairman of Magnificent Estates, a midscale hotel, said that the decrease of demand is discouraging owners from converting industrial properties to hotels—as are logistical issues. (Giving every room in a former factory a window poses a challenge, he said.) New-build hotels, on the other hand, can be designed to order, maximizing both square footage and revenue.

By the end of 2016, Hong Kong is likely to have an estimated 274 hotels with about 76,950 rooms. By the end of 2017, it will have 292 hotels with about 81,365 rooms.  

Sources: South China Morning Post, Hong Kong Extras

Suggested Articles

The collection's portfolio has 24 founding member hotels, resorts, and  lodges  that combine luxury with sustainability. 

Two new properties from Hilton and a Marriott soft brand have made their debuts across the country in recent days.

The company’s new chief development officer is thrilled with the opportunity to take Radisson to the next level.