Changes and advancements

How well has Hong Kong’s hotel industry recovered so far? What is the business outlook for 2024?
In 2023, Hong Kong’s average room occupancy stood at 82 per cent, compared to 91 per cent in 2018, which was a record year. We are still on the recovery path, as per capita spending by overnight visitors was only HK$6,100 (US$778) versus HK$6,600 in 2018. Also, passenger flight capacity last year reached only 55 per cent of the 71.5 million recorded in 2018.

However, during the eight days of Lunar New Year 2024, hotel performance rebounded to 2019 levels. The average occupancy rate was 93.4 per cent, which was only slightly lower (0.4 percentage points) than in the same period in 2019. The average room rate was HK$1,715, an increase of six per cent over 2019, surpassing original projections.

High-end hotels performed well this Golden Week holiday, but rates of mid- to budget categories barely reached 2018 levels. This is because there are fewer group tours from China and the travel patterns of Chinese visitors are changing. For example, small-group and individual travellers are no longer staying overnight. In the old days, groups could spend on average from HK$800 to HK$1,000 per room but now can’t even afford HK$600. Yet there are opportunities: Qingdao and Xi’an, each with a population of 10 million, were recently added to the Individual Visit Scheme (IVS) cities, so travel agents and medium-tariff hotels should work together and craft group packages to court business from these cities.

The Airport Authority is projecting that air traffic at Hong Kong International Airport will recover fully by the end of this year, although (it) hasn’t shown any supporting data. I understand that less than six months ago, Cathay Pacific said it still needed 1,800 pilots. The shortage of passenger seats remains an issue and, therefore, (is) a critical part of a vicious cycle driving airfares higher as carriers try to cover overheads and overall income. (Thus), we hope Mainland China and international carriers will bring more visitors to Hong Kong.‌

What are the driving forces behind the industry’s pace of recovery?
We recognise the critical role of the government in organising more mega-events to enhance the city’s vibrancy, especially in providing additional funding – about HK$100 million for promotion and HK$1.95 billion to implement and execute these events. It might consider leveraging these mega-events with local district events to create activities around the clock, a dynamic environment that attracts international and Chinese mainland visitors.

Hong Kong has many attractions beyond fireworks, and things to do. Rethinking in-depth tour products and itineraries would further enhance Hong Kong as a destination.

Adding more cities to the IVS in combination with relaxing duty-free spending limits here for Chinese mainland visitors, as proposed, would be a strong incentive for more visitors to come here to spend.

However, I must say that better communication among the trade, government, the Hong Kong Tourism Board, and the retail sector would engender closer collaboration, the kind that allows local district events to be folded in with broader experiences and be better targeted to specific audiences. Since tourism came under the same bureau as culture and sports two years ago, we look forward to a culture-sports-tourism blueprint.

Hong Kong will resume its three per cent hotel accommodation tax next year. What does impact will it have on HKHA and its members?
This tax (will return) after 16 years, from January 1, 2025. The industry was not consulted, so we were surprised when it was announced in the 2024–25 Budget Speech. Even though the government has invested heavily in the mega-event economy, this tax may well give visitors pause about making extended and even overnight stays here, because hotel guests will bear the cost. It will place an additional administrative burden on hotels even as they struggle with the continuing manpower shortage.

We understand the government needs income but why impose the tax when hoteliers are still holding out for a tourism recovery? It is an unwelcome strain, especially now. Collaboration and transparency are essential to safeguarding Hong Kong’s economic recovery and ensuring the sustainability of our vital tourism sector.

‌Another government policy – ban on single-use plastics – will soon come into play. How will this affect the hotel industry?
This policy will come into effect on April 22. Hotels must adapt swiftly to comply with regulations, which may entail additional costs. To this end, we are working closely with the Environmental Protection Department (EPD) to arrange briefing and training for hotel members and draw up best-practice guidelines.

However, being able to use only certain types of suppliers will doubtlessly affect rates. Therefore, we urge the EPD to establish a website dedicated to approved suppliers and alternative products to disposable plastic tableware and banned hotel amenities.

Local and stand-alone hotels are going to have to bear higher costs than international hotel chains; they may have to charge for in-room amenities, affect(ing) guests’ impressions.

My own hotel chain has a green initiative to switch from plastic bottled water to water filters and smart water-refilling stations, but some clients still want free bottled water. So, I think it is vital to educate not just locals, but also travellers so they too are aware of our green movement.

What challenges does the hotel industry face today?
Manpower crunch, higher operating costs and, consequently, lower service standards. Two years ago, there were 40,000 full-time hotel staff. Last June, there were 30,000 – 25 per cent fewer! Where did they all go? Most emigrated, but apart from those, people changed jobs or were headhunted by other industries, like insurance and banking, because these types of industries appreciate hospitality skills.

Covid-19 also forced many owners to cut staff or have full-timers take unpaid leave. Even loyal, long-serving staff (were not) spared, so they lost confidence in the hotel business. Part-time staff is only a temporary solution to tight labour supply, but is more costly. We (have) appealed to the government to expedite the application process of the Enhanced Supplementary Labour Scheme and to add the hotel sector to the Sector-Specific Labour Importation Schemes.

In this difficult transition, housekeeping and F&B – service and kitchen – are suffering. Having too many part-timers can affect the quality of service. Let’s not forget that there are new hotels in the pipeline, which will add more pressure (on human resources).

The solutions? Immediately importing labour, yes, but another is to expand vocational and technical channels to attract people to work and stay in Hong Kong, such as the Vocational Professionals Admission Scheme. Hotels do not need degree holders to be waitresses or chefs.