Hong Kong Health Report Stays Positive Despite Changing Conditions

by Vera Lye, Contributing Editor, APAC | November 14, 2018

Hong Kong is a market that has experienced a fair amount of change in recent years. Being in close proximity to the world’s largest travel market that is China, it is inevitable that whatever happens there immediately impacts Hong Kong. We speak with Christine Liu, STR’s regional manager for North Asia looking after all business development teams in the region, and her colleague Vincci Yang, business development manager overseeing South China, Hong Kong, Macau, Taiwan and South Korea. Although the industry is coping well, and hoteliers appear to be in good control, new challenges and changes are always in the immediate horizon. What’s next?

Q: The last HVS report on Hong Kong (3Q 2017), reported a steady climb of Mainland Chinese tourist back to the shores of Hong Kong after it lost some allure against other Asian and European destinations. Is this is still continuing for Hong Kong? What are its current challenges with regards to tourist numbers?

A: The drop in the number of mainland Chinese travellers in 2015 and 2016 is not because of a natural shift of destination, but the Umbrella Movement, a political issue between Hong Kong SAR and Beijing in Q4 2014. When the tension eased, and some other political cases like South Korea and Taiwan shifted Chinese anger away, Hong Kong started recovering and has been ever since. We saw a very aggressive bounce back in 2018.

Q: Which segments of markets are the Hong Kong tourism trade most interested to boost at the moment? Luxury? Business/MICE traffic? Leisure? Short or long haul?

A: MICE traffic is always the base, but due to the increasing ADR and the improvement of meetings facilities in other markets, MICE business has been shifting to other Chinese cities such as Shanghai, Macau or Southeast Asian cities such as Bangkok, as the overall costs in these places are lower. But bringing MICE back is always on the list as MICE business not only contributes to room revenue, but also to catering and other revenue streams.

Q: How would you describe the health of the Hong Kong hotel industry?

A: Hoteliers know what they are doing in Hong Kong, and they are going a great job.

Q: With the new highspeed rail option for travellers between Hong Kong and some cities in China, what changes do you anticipate for the travel trade at large and for the hotels in particular?

A: Having the rail option will definitely bring more Chinese people to Hong Kong. We have seen the positive impact to hotel business in other cities like Xi’an, Chengdu and Guiyang after the highspeed train system was launched. It’s much more convenient bringing people in – not just business travellers but also families and leisure tourists, especially for those cities without direct flight connections to Hong Kong.

But on the other hand, I doubt Hong Kong’s attractiveness to repeat leisure travellers. With more and more theme parks in mainland China, and more shopping destinations in Asia, and with the ADR of hotels in Hong Kong increasing, Hong Kong no longer has the edge like before in terms of shopping, sight-seeing and entertainment activities. The number of visitors might go up, as people from third-, fourth- and fifth-tier Chinese cities have easier access to Hong Kong, but the spending power of these visitors might not be as great, so in terms of hotels, maybe the midscale hotels may benefit the most.

Q: How should hotels prepare for such changes?

A: Economy holidays are the new trend. Hong Kong’s products and services need to be ready for family travellers. Lifestyle and family suites will better cater to the increasing leisure demand. Family packages can be created to attract the price sensitive segments.

Depending on the distribution channels, hotels might need to focus on their rates given to wholesalers, discounts given to OTAs.

Q: How are the hotels in Hong Kong managing the balancing act between healthy room rates and sustaining occupancy rates? How do you foresee this playing out in the coming six months?

A: Hong Kong never really suffered from low occupancies unless there was a situation such as the economic crisis in 2009 or the “Umbrella Movement” in 2014 and 2015. Hoteliers in this market actually have greater confidence in believing this market will bounce back as they’ve experienced a lot of dramatic ups and downs. When they see demand coming back, driving the rate up will definitely be their top priority. So this is a very balanced market in terms of occupancy rates and ADR.

Q: What do you think are the challenges hotels in Hong Kong will likely face in the next 3 years?

A: It depends heavily on the political situation between Hong Kong SAR and Mainland China.

There is some new supply coming to the market, but it will not pose as a big challenge since Hong Kong hotels have been enjoying high occupancy rates.

Vera Lye, Contributing Editor, APAC

Vera has been a travel trade journalist in Asia/Pacific for two decades, working in most of the major trade publications. She is now based in Sydney where she juggles her writing with managing her young son’s development as an aspiring tennis professional.

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