Are Hong Kong hotels on the road to recovery?

Occupancy at medium tariff hotels edged up to 89%.

Tourists are returning to Hong Kong as shown in the figures for the first four months of the year. There were around 19.02 million visitors, representing 3.2% YoY growth. This was on the back of the increase in overnight visitors which grew 5.4% to 8.82 million, representing 46% of total arrivals.

According to DBS Group Research, the recovery of overnight visitor arrivals aided the hotel occupancy on its upward trajectory, reaching 88% in 4M17. Amongst the different grades of hotels, the medium tariff hotels — which were hard hit during the previous downturn — witnessed the largest improvement in occupancy. In 4M17, occupancy at medium tariff hotels stood at 89%, up 7 percentage points.

Whilst there was a recovery in hotel occupancy, room-rate improvements have lagged. In general, medium tariff hotels fared better than their high tariff counterparts, and they have been able to raise the room rates since 3Q16, partly aided by the low comparison base. medium tariff hotel room rates have increased by 1.9%, 2.9%, and 4.9% in 3Q16, 4Q16, and 4M17, respectively. On the other hand, room rates for high tariff A hotels remain on a downtrend, falling by 5.5% in 4M17.