Expect more empty hotel rooms in Hong Kong

Visitor arrivals are forecast to drop 2% this year.

Whilst Hong Kong’s visitor arrivals and hotel occupancy rates showed signs of recovery at the end of 2016, hoteliers can expect a turnaround this year.

According to CBRE, with the launch of new hotel rooms and an expected decline in visitor arrivals, occupancy in the coming years will suffer downward pressures.

“Unlike last year when new supply was limited, there will be 4,000 new hotel rooms coming on stream in 2017, including Kerry Hotel (546 keys), Disney Explorers Lodge (750 keys), and iclub Ma Tau Wai Hotel (340 keys). The substantial increase in room inventory will build pressure across all market segments throughout the year, especially when visitor arrivals is forecast to drop by 2% yoy in 2017,” CBRE said, noting that there will be a period of adjustment despite of the encouraging signs of recovery witnessed in 2016.

To recall, Hong Kong’s hotel occupancy rate stabilised in 2016, increasing by 45bps to 86.9%, whilst Room Nights Sold (RNS) rose 1.6% year-on-year. Annual inbound visitors also showed signs of recovery in 2016 following a 4.5% drop from a year earlier.

Hotel investment activity strengthened in H2 2016 with the purchase of two assets by local investors. The transactions included a HK$878m deal for Butterfly on Morrison and HK$344m sale of Ovolo West Kowloon.

“Following a relatively quiet year for hotel acquisitions in 2016, we expect to see an uptick in transactions in 2017, mostly for small- and medium-sized assets. Some hotels will be acquired for investment whilst others are poised to be re-developed into other commercial or residential projects,” said Marcos Chan, CBRE Head of Research, Hong Kong, Southern China and Taiwan.