Inbound travel picking up as borders reopen

• As at YTD August 2022, overall visitor arrivals increased by 245.1% y-o-y to a total of 183,662 arrivals, due to the easing of requirements to enter the city.
• Arrivals from mainland China, Hong Kong’s top source market, increased by 284.5% y-o-y as at August 2022, totalling 150,309 and accounting for 81.8% of all inbound arrivals.

Supply pipeline continues to be low

• Notable openings in the quarter consisted of AKI Hong Kong – MGallery and China Rich Hotel, both situated in Wan Chai.
• Transaction volumes in Hong Kong remained subdued in the quarter. However, the transactions in the first nine months of 2022 have resulted in a reduction in existing room supply as the acquired hotels will all be converted to co-living spaces.

Travel is slowly returning to the city

• As at YTD September 2022, revenue per available room (RevPAR) of luxury hotels increased to HKD 917, a 26.4% increase y-o-y. Similarly, occupancy grew by 5.3 percentage points (ppts) y-o-y to 34.8%, and average daily rate (ADR) by 7.3% to HKD 2,638, driven by an increased volume of people travelling to the city as border restrictions ease.
• Luxury hotels registered an ADR of HKD 2,793 in the month of September, increasing by 9.9% against the same time last year. This was largely due to relaxed social distancing restrictions and increased international demand as the border reopened.

Outlook: Full recovery to rely on the reopening of mainland China

• While Hong Kong has now opened to other countries, the ‘0+3’ self-monitoring requirement will likely continue to hinder short-term leisure visitors from entering. As such, hotel performance is anticipated to be slow until mainland Chinese tourists return and when all entry requirements have been completely lifted.
• Given Hong Kong’s strong reliance on a single market and the current sentiment about travel, a full recovery to pre-COVID-19 levels is expected to take at least three years.