APPD Market Report Article

Hong Kong

August 26, 2022

Mike Batchelor, CEO - Hotels & Hospitality Group, Asia

21.3%

HKD 763

RevPAR
Rising

Inbound travel remains muted due to quarantine restrictions

  • As at YTD May 2022, overall visitor arrivals have contracted by 22.0% y-o-y to a total of 21,487, due to the ongoing COVID-19 pandemic and continued border restrictions.
  • The number of visitors from Mainland China, Hong Kong’s top source market, totalling 16,103 and accounting for 74.9% of all inbound arrivals, declined by 1.79% y-o-y as of May 2022. This was due to tightened COVID-19 restrictions in Mainland China, which limited cross-border and domestic travel.

Supply pipeline slows below long-term historical growth rate

  • Notable openings in 2Q22 consisted of The Silveri, MGallery by Sofitel and the soft opening of the Hong Kong Ocean Park Fullerton Hotel.
  • There were several hotel transactions in the second quarter of 2022, leading to a reduction in existing room supply as the purchased hotels will all be converted to co-living spaces.

Staycations remain the main source of demand

  • Revenue per available room (RevPAR) of luxury hotels remained the same at HKD 763, marking a stable trend as at YTD June 2022. Occupancy grew by 4.43 ppts to 30.3%, with average daily rate (ADR) up by 3.6% to HKD 2,514, driven by the continued demand for staycations as Hong Kong’s social distancing restrictions were relaxed.
  • Luxury hotels registered an ADR of HKD 2,729 in the month of June, increasing by 12.4% against the same time last year despite continued border restrictions. This was largely due to relaxed social distancing restrictions, that had been hindering locals from utilising public facilities and dining in. With the easing of restrictions, hotels have marked corresponding increases in rates.

Outlook: Further delays in recovery expected due to border controls

  • Mainland China does not appear likely to open its border with Hong Kong in the near future. While Hong Kong has now opened its borders to other countries, the current quarantine requirements will likely continue to hinder visitors from entering. As such, hotel performance is anticipated to be muted until Mainland Chinese tourists return and until all quarantine measures are completely lifted.
  • Given Hong Kong’s relatively huge reliance on a single market and travel sentiment, a full recovery to pre-COVID-19 levels is expected to take at least two to three years.

Note: Hong Kong Hotels refers to Hong Kong's luxury hotel market.

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