APPD Market Report Article
Hong KongFebruary 28, 2022
Inbound travel remains muted as border controls continue
- As at YTD November 2021, overall visitor arrivals contracted by 97.7% y-o-y to a total of 81,950 arrivals due to the ongoing COVID-19 pandemic and the new Omicron variant. Likewise, same day visitor arrivals continued to be impacted, registering a y-o-y decline of 99.9% to 1,742, against 2,209,346 recorded same time last year.
- Mainland China, Hong Kong’s top source market, declined by 97.8% y-o-y in November 2021, totaling 59,219 arrivals, accounting for 72.3% of inbound arrivals. Arrivals from this source market is facilitated by the launch of Come2HK Travel Scheme.
Pipeline is slowing below long-term growth rate
- The only notable opening in 2021 is the 1,001-room Four Points Tung Chung. Its sister property Sheraton Tung Chung was launched in December 2020. Due to the ongoing pandemic, some other scheduled openings such as The Silveri, MGallery by Sofitel has been delayed to early 2022.
- There were several hotel transactions in Hong Kong in 2021, leading to a reduction in existing rooms supply as the purchased hotels will be converted to co-living projects. This type of transactions includes the 158-room Butterfly on Prat and the 148-room Travelodge Central Hollywood Road.
Staycation remains as the main source of demand
- Revenue per available room (RevPAR) of luxury hotels increased by 62.2% y-o-y to HKD 783. Occupancy grew by 13.21 percentage points to 30.9% whilst average daily rate (ADR) was down by 7.2% to HKD 2,536, as hotels have been offering some discounts to lure local demand without losing rate integrity.
- Luxury hotels registered an ADR of HKD 3,009 for the month of December, improving from HKD 2,400 to HKD 2,600 in the first eleven months whilst maintaining the occupancy level at above 30%. This was facilitated by the year-end holidays and celebrations.
Outlook: Performance expected to remain muted due to restrictions
- Due to the new Omicron variant, Beijing appears to be reluctant of opening the Mainland borders with Hong Kong. As we have observed during the past months, Hong Kong government prioritizes the opening with Mainland China. As such, the city is unlikely to announce any opening plans with other countries. Hotel performance is anticipated to be muted until Mainland Chinese tourists return.
- Given Hong Kong’s relatively huge reliance on a single market and people’s travel sentiments, we expect that a full recovery to pre-COVID-19 will take at least two to three years.