Facing the rate challenge

The Chinese are returning to Hong Kong, but this is not relieving agents of challenges they face with dynamic room rates, finds Prudence Lui

While the rebound of mainland Chinese traffic in 2H2017 uplifted the hotel business in Hong Kong, fluctuating and dynamic room rates remain a concern in the travel industry.

Last year, average room occupancy grew 2.3 per cent to 90.8 per cent and average room rates increased 3.4 per cent to HK$1,220 (US$155). And in April this year, average room occupancy hit 92.4 per cent with average room rates up by 13.3 per cent to HK$1,396.

The new Hong Kong-Zhuhai-Macau Bridge is likely to shore up Chinese traffic into the city

Some in the industry anticipate further growth in Chinese traffic following the Hong Kong-Zhuhai-Macau Bridge and Express Rail Link, heightening concerns of rate increases and fluctuations.

This is an especially salient matter for agents such as PC Tours and Travel’s general manager Cary Chiu, faced with the challenge of dynamic pricing with the rise of OTAs and direct booking.

“Hotels have scrapped traditional contracts for room allotment arrangements. Room rates can be double the contract rate after the cut-off period. Some hotels even ask us to tell clients to switch travel dates in order to suit the available room dates,” Chiu said.

“As a B2B operator, how can I sell rooms to overseas agents with a markup, when clients can book direct? We can’t do much and just pray for ourselves,” he lamented.

“So far, only local hotels still stick to contract rate with us to promote their brand overseas but in the long term, I don’t think this partnership will last long once they establish their name with overseas clients.”

Simple Travel Services’ director Vandana Sachdeva pointed out that fluctuating room blocks and rates, while not a new trend, pose an added challenge for markets such as India.

She said: “It becomes more challenging (for the Indian market) as the contracts signed for a period go for a toss and then the agents in India lose trust in DMCs as the quotes given don’t hold any value after a period of time.

“With greater connectivity, the mainland market is bound to overtake other markets. The hotels need to evaluate which market/business they would like to support in the long run. If short-term profit is the only objective then it will definitely have an impact on the hotels in the long run when the Chinese market dips during any economic downturn,” Sachdeva added.

While Chiu is sceptical that the new connectivity infrastructure would drive up hotel demand, since easy accessibility promotes same-day return, he still welcomes new hotel supply especially in the underserved four-star category.

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