Hong Kong government plan to use hotels for temporary housing will help struggling owners, says industry veteran

By Sandy Li

/ SCMP |

December 10, 2020 2:00 PM SGT

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SINGAPORE (EDGEPROP) - The Hong Kong government's plan to use hotels and guest houses for temporary housing has been welcomed by a veteran hotelier, saying that it could prevent some operators from going under during these trying times.

"There are many hotels in noncore areas such as Tsuen Wan, Kwai Chung, Tsing Yi and Tin Shui Wai, with hundreds of empty rooms, which can be used as transitional housing immediately and help these operators to stay afloat," said William Cheng Kai-man, chairman of Magnificent Hotel Investments, who proposed the idea to Chief Executive Carrie Lam Cheng Yuet-ngor in October.

Read more: Property buyers hunt for bargains in Tung Chung, Tsing Yi and Discovery Bay as Cathay Pacific staff leave Hong Kong

During her annual policy address on November 25, Lam said the government will launch a pilot scheme to subsidise non-government organisations to rent rooms in hotels and guest houses for use as transitional housing, with funding to be sought from the Community Care Fund. While no date has been set for the launch of the proposed scheme, it is expected to be implemented soon.

In Hong Kong, the world's most expensive property market, the average waiting time for public rental housing has risen to 5.6 years, and the number of family and single elderly applicants has grown to 156,400. Many are forced to live in poorly maintained subdivided flats in rundown urban buildings during the long wait.

According to JLL, there are 308 hotels with 85,238 rooms and 1,481 guest houses with 12,521 rooms in the city. The overall average occupancy rate for hotels was 52 per cent, and 56 per cent for guest houses in September, JLL added, noting that the lack of tourists because of the coronavirus pandemic was badly hurting the sector.

"If the government can utilise the lower class hotels and guest houses, it will provide a boost to this struggling sector," said Hannah Jeong, head of valuation and advisory services at Colliers Hong Kong.

Magnificent's Cheng said that such struggling hotels in noncore areas could accept slightly over HK$130 (US$17) per night per room if the government rented out the entire property for temporary housing without any services.

Cheng said these hotels charged around HK$300 per room before the Covid -19 pandemic, but would have ended up with an average net income of between HK$135 and HK$150 after deducting management and housekeeping expenses, which could range between 45 and 50 per cent.

"I think it is feasible [for hotel owners] if the government pays this rate for the whole hotel without any services as transitional housing," Cheng said. In absence of services such as cleaning and staff salaries, hotel owners could generate HK$4,000 to HK$4,500 per room per month which is acceptable, he added.

Cheng's company owns seven hotels in prime locations, including four under the Best Western brand in Causeway Bay and Tsim Sha Tsui and three under the Ramada brand in North Point, Tsim Sha Tsui and Sai Ying Pun. However, he said that his company had no intention of joining the government scheme as his hotels' occupancy rates had improved after offering long-term stays to locals at affordable rates.

Ten hotels and guest houses were already in talks with officials about the plan, a government source said last week.

Meanwhile, Frank Chan Fan, Secretary for Transport and Housing, said on Sunday that the rent for hotel rooms to be used as temporary homes should not exceed 25 per cent of household income of eligible families.

He added the government would like to modify the rooms and add kitchens to accommodate families with three to four members if the owners willing to rent entire hotels for two to three years as temporary housing.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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