The hotel industry in Hong Kong is set for an exciting year as operators welcome an influx of tourists while property owners bank on getting higher prices from buyers for their assets, according to some market experts.
Tourist arrivals, which jumped by a third to 44.5 million in 2024, are likely to sustain its momentum as the government rolls out programmes to boost its role in the economy. The city is also facing a shortfall in student beds, fuelling demand for hotel conversion projects into student accommodation.
The hospitality sector is expected to contribute 5 per cent to the city’s economic growth by 2029 from 2.6 per cent in 2023, returning its significance last seen in 2018. In a blueprint unveiled in December, Hong Kong is seeking a HK$120 billion (US$15.4 billion) boost to the economy with 65,000 new jobs in the next five years.
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“Despite challenges, the hotel sector is poised for a promising year ahead,” said Shaman Chellaram, senior director for Asia in valuation and advisory services at Colliers. “Occupancy rates are also expected to improve,” he added, given the coming events including the Lunar New Year fireworks, the Rugby Sevens tournament in March and the Coldplay concert in April.
Henderson Land, one of Hong Kong’s largest developers, is taking note of the potential upside. The group is embarking on a redevelopment of the 67-year-old Champagne Court in Tsim Sha Tsui into a new hotel under its Miramar Group.
The proposed 23-storey hotel will offer eight suites and 91 rooms, plus a commercial complex with a gross floor area of about 138,000 sq ft of retail shops, restaurants and banquet halls, according to a Miramar filing to the Hong Kong stock exchange last week.
The city saw notable hotel investments of HK$7.85 billion across eight transactions over the last two years that underlined the sector’s resilience, according to Colliers, despite a sharp drop in total outlays for the year. Overall investments in 2024 declined 62 per cent to US$290.4 million in 2024, according to data compiled by JLL.
The government’s “Studying in Hong Kong” plan has caused a mismatch in student inflows and housing, analysts said. Colliers estimated that 175,000 student beds will be needed by 2028, while supply is projected at 55,000. Nine en-bloc private student accommodation projects added 2,848 beds to the market last year, while another 2,000 will be ready this year, it said.
“We anticipate an increase in hotel investment as select pockets of capital seek well-priced midscale hotels for conversion to student accommodation,” Chellaram said. “Additionally, there is a growing interest in full-service upscale hotels, which rarely come to market.”
In October, Chief Executive John Lee Ka-chiu encouraged the private sector to convert hotels and commercial buildings through self-financing and private initiatives to support his mission of making Hong Kong a global hub for post-secondary education.
Still, Hong Kong’s hotel segment is likely to face the same headwinds as in 2024, and could be pressured by China’s economic struggles and heightened geopolitical tensions, according to Marina Bracciani, vice-president of hotel research at JLL’s hospitality group in Asia-Pacific.
“Hong Kong’s hotel recovery is expected to continue lagging other major gateway cities in the region,” she said. “The subdued level of trading is likely to lead to owners holding their assets while waiting for an opportunity for pricing to improve” while weak holders look to exit given the lack of short-term clarity, she added.
The Trump administration raises the prospect of a new trade war and a stronger US dollar, both of which will have a direct impact on Hong Kong, she said, adding that most investors are likely to take a wait-and-see approach.
More from South China Morning Post:
- Hong Kong hoteliers brace for ‘worrying’ trends as lodging tax, US trade war dent tourism
- Distressed property deals to rise this year as slump forces landlords, receivers to cut prices
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