Hong Kong luxury hoteliers to delay 1,000-odd new rooms in market at disastrous levels due to pandemic and protests

By Sandy Li sandy.li@scmp.com

/ https://www.scmp.com/business/article/3082389/hong-kong-misery-forces-luxury-hoteliers-delay-1000-odd-new-rooms-market?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3082389 |

May 5, 2020 11:27 AM SGT

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Hong Kong's luxury hotel owners have postponed plans to add more than 1,000 new rooms to a "disastrous" market still reeling from an economic slump caused by months of social unrest and the coronavirus outbreak.

CK Asset Holdings has deferred the opening of its 840-room Hotel Alexandra in Fortress Hill to a later date while a consortium of Hong Kong's biggest developers has pushed back the 206-room The Silveri Hong Kong MGallery in Tung Chung by at least six months.

The decision reflects underlying pessimism in an industry facing steep declines in tourist arrivals and occupancy rates this year amid the pandemic. Border closures have curbed demand for travel while construction works were halted to help contain the Covid-19 disease.

"The hotel opening is postponed due to the current virus situation," Christina Cheng, general manager of Hotel Alexandra, said in an email. "There's no confirmed opening date at this stage."

The Silveri Hong Kong will open by June 30 instead of its original plan for the end of 2019, citing delay in construction schedule, according to a spokeswoman at Citygate Development, whose owners are Swire Properties, Henderson Land Development, Sun Hung Kai Properties, New World Development and Hang Lung Properties.

"We are closely monitoring the Covid-19 situation and assessing its impact on the opening date," she added.

The two luxury hotels account for about a quarter of 4,092 new rooms planned for this year, according to the Hong Kong Tourism Board. As well as this, some 1,295 rooms from four hotels have been taken off the market for "renovation" for up to 20 months.

Data published by the board this week showed prolonged distress in the industry. Tourist arrivals fell 98.6 per cent to 82,285 in March versus 5.86 million a year earlier, it said. The number of visiting mainland Chinese tourists, the lifeblood of the city's retail and hospitality industry, has slipped down to 27,000, a 94.9 per cent drop.

Hotel operators were only able to fill three in every 10 rooms in February this year as the viral outbreak escalated, compared with nine in the same month last year, according to the Board.

"It's a disaster for hotel occupancy as visitor arrivals dropped from 4-5 million a month to just over 80,000," said Martin Wong, a research and consultancy associate director for Greater China at Knight Frank. "It's meaningless to open new hotels at this moment. Most hotel operators will not have high hope for the Labour Day holiday as the government has not relaxed travel restrictions."

About 840,000 mainland Chinese visitors arrived in Hong Kong in the first three days of the Labour Day holiday in 2019, a five-year high. Fewer than 100 came each day on average in April ahead of this week's holiday break, the tourism board said.

Housing market slump sends more borrowers into negative equity

Hong Kong's economy could shrink by 4 to 7 per cent this year, the government warned this week, after contracting 1.2 per cent last year in the first recession since the global financial crisis. China's economy shrank last quarter for the first time since the 1976 Cultural Revolution.

There are about 84,000 hotel rooms in Hong Kong, of which 35 per cent cater for the luxury and upscale market, while the rest are midscale and economy hotels. Hotels undergoing renovation may be preparing themselves for the rebound.

"The closures of these hotels are examples of this trend," said Corey Hamabata, senior vice-president at JLL Hotels and Hospitality Group. "The current environment is an opportunity for well-capitalised owners to reposition their properties for the recovery."

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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