Hong Kong Hospitality Insights | The inbound outbound dilemma | May 2024
While inbound visitor numbers have increased significantly year-on-year, the hospitality sector is adapting to the current trend of more budget-conscious experience-driven travellers.
Overview
Reduced spending from visitors entering Hong Kong has made the headlines lately as the city tries to boost its tourism, retail and hospitality sectors. Hong Kong’s outbound travel trend, while in line with pre-pandemic levels, is being stimulated by improved accessibility with the Greater Bay Area, and the weaker currencies in the Mainland and key destinations such as Japan. The strong dollar means people’s Hong Kong Dollars are stretching further in those markets whilst Hong Kong has become more expensive for many inbound visitors. The growing trend of visitors looking for more meaningful experiences rather than material purchases is amplifying this impact. The was evidenced over Chinese New Year and the recent May Labour Day Holiday, with many inbound visitors opting to see the city’s sites while spending less, with some visitors coming in for the day, spending the night in Shenzhen (given the cheaper accommodation), and then coming back across to Hong Kong again. As we cross the mid-way point of the second quarter of the year, let’s explore how visitor numbers and Hong Kong’s hotel sector performed in first quarter of 2024.
Overnight Visitors surge year-on-year
Against the backdrop of the city’s 34 million visitors in 2023 (of which 17.16 million were overnight visitors), Q1 2024 had 11.23 million total visitors with nearly 8.7 million (77%) from the Mainland. Of the total visitors, 5.6 million were overnight visitors, up 240% year-on-year, with 3.86 million (69%) from the Mainland and the balance from short-haul and long-haul markets. The US was largest contributor from the long-haul market segment with 134,070 overnight visitors, while Japan, Philippines, South Korea, Taiwan and Thailand each contributed over 100,000 inbound overnight visitors. India has become another key source market with over 45,000 visitors for the quarter.
While overnight visitors surged year-on-year for the first quarter, the number remained 28% below the 7.775 million overnight visitors in Q1 2019.
Hotel performance – a local perspective
Occupancy (OCC) for Q1 2024 was 85%, up from 76% for the same period in 2023. Average Daily Rate (ADR) was up 19% to HKD 1,430 against the Q1 2023 average of HKD 1,200. Revenue Per Available Room (RevPAR) climbed to HKD 1,216 versus HKD 912 in Q1 2023, although just slightly above the full-year 2023 RevPAR of HKD 1,148.
Taking a closer look at the month-on-month performance, daily rates for January and February 2024 were up significantly (between 20% to 40%) on Q1 2023 boosted by Chinese New Year and major events compared with the fact that Hong Kong had just started to open-up in early 2023. As for March 2024, ADR actually slid between 2% to 5% across most segments against March 2023 numbers (other than a slight increase in midscale / medium tariff hotels and some luxury hotels), suggesting a slight softening in the market.
On a district level, Yau Ma Tei and Mong Kok in Kowloon performed strongly with occupancy averaging 94% for the first three months of the year. Tsim Sha Tsui was in the high 80% range for same period, with other Kowloon locations hovering at the mid-80% level. Central and Western posted high-70% occupancy, while Wanchai was at 84% for the quarter.
In terms of categories, High Tariff A Hotels (upscale, upper upscale and luxury) lagged the market with occupancy in the high 70% range versus 87% for High Tariff B Hotels and 88% for Medium Tariff Hotels, reflecting the trend of more budget-conscious inbound visitors. ADR for the respective categories were at HKD 2,409, HKD 1,124 and HKD 758. Dissecting the High Tariff A segment, at the pure luxury end of the market with ADRs significantly in excess of HKD 3,000, occupancy rates lagged further in the 45%-70% range depending on the hotel, although some luxury operators held rates at fairly high levels.
Rates and occupancy peaked during major events and holiday periods, but perhaps not meeting operators’ initial expectations, especially for full-service hotels, as the city looked to balance the effect of the inbound numbers with the outbound trend. The reduced inbound spending and outbound trend has further impacted non-room revenue, with banquet and food and beverage numbers significantly off for most operators. For example, over the Easter holiday at the end of March the city witnessed an outflow of almost 2 million people, while inbound visitors reached 1.2 million.
Hotel Supply
At the end of March 2024, the city boasted 324 hotels with 90,501 keys, up from 321 hotels in 2023. Hong Kong was graced with the grand reopening of Lanson Place Causeway Bay following the stunning renovation led by Parisian hotel designer Pierre-Yves Rochon, with a number of new hotel openings planned for later this year and 2025.
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