Hong Kong Hoteliers Expect Bright Future

<B>Hong Kong Hoteliers Expect Bright Future</B>

By Robert Selwitz

After several years of unpredictable gyrations, the Hong Kong market appears to be settling down. With no new major business or luxury hotels on the drawing board--though less expensive digs will be forthcoming--hoteliers are predicting that rates will continue to be a bargain when matched against prices in prime U.S. and European business cities.

Hyatt International senior vice president of development Jack Kerr said, "we're not planning any more properties beyond our present locations. Indeed, we're focusing much more of our attention on the balance of China." Quoting daily rates of about $200 at the Grand Hyatt on Hong Kong Island and $150 at the Hyatt Regency on Kowloon, he said that "Hong Kong still is recovering from the Asian economic crisis. Before, much of the overbuilding was sparked by Japanese investors, who today are having trouble with their own portfolios at home. As a result, I see nothing to upset the current rate or occupancy picture for Hong Kong's most prestigious hotels."

At the Sheraton Hong Kong Hotel and Towers, general manager Ananda Arawwawela, said occupancies for the first six months of this year reached 87 percent compared with 78 percent for the same 1999 timeframe. Single room rates at his 780-room Kowloon property are $145. "We're a long way from the days right before the handover, when we had contract rates of over $200, until the bubble burst. The post-handover days did not generate the kind of interest we anticipated, and then Thailand and Indonesia began the economic crisis."

As for new buildings, Arawwawela said that about 1,000 rooms are scheduled to be added this year to the city's stock, most of them two- or three-star properties that primarily cater to local or regional travelers. He noted a decided turning away of interest in hotel building by local investors.

"In Hong Kong, most large hotels did not have that much foreign capital, and mostly are operated under management contracts," he said. "But today, funds from Hong Kong's financial leaders are more likely involved with dot.com, telecommunications or other high tech ventures."

Gail Tay, regional director of marketing Greater China for Bass Hotels and Resorts, said that while occupancy rates now stand at 82 percent, revenue has dipped. However, she expects Bass to expand its Hong Kong presence, which now includes the 600-room Holiday Inn and 579-room Grand Stanford Inter-Continental, a conversion of the former Grand Stanford Harbor View. Both are on Kowloon.

"Over the past three years, Hong Kong has had to become entrepreneurial again," said Jean Forrest, director of marketing for The Regent Hong Kong. "No longer could we enjoy the world knocking on our door, lining up to come and visit. The economic crisis across Asia significantly impacted Hong Kong's economy. As a result, businesses and hotels had to find new ways to survive and profit."

Ian K. Perkin, chief economist at the Hong Kong General Chamber of Commerce, said that two new factors had tremendous impact on Hong Kong last year. During 1999, the total visitors from Mainland China, Macau (handed over to China by Portugal last December) and Taiwan accounted for more than half of total arrivals. Compare that with 1990 when, Perkin said, "Hong Kong used to welcome just over two visitors from the rest of the world for every one from China and Taiwan. Five years ago, that ratio had shrunk to 1.5 to one."

Not only did the recent influx from China help cushion Hong Kong against the effects of the Asian economic downturn; it also "serves to illustrate the relatively poor performance of Hong Kong as an attraction for visitors from elsewhere," Perkin said. This is directly impacting Hong Kong's hotel growth since, "arrivals from the Mainland and Taiwan tend to have different spending patterns and demands than travelers from North America or Europe. Regional travelers usually do not to stay in the most expensive hotels, but with relatives, or in economy hotels and guest houses."

Therefore, according to another analyst, "the raw figures about Hong Kong visitor traffic don't tell the entire story. While the numbers look good, the people they represent are likely to spend less in services than those who have long been bedrock to Hong Kong's tourist industry. The likelihood of major new luxury properties arising anytime soon is distinctly remote."

According to the Hong Kong Tourist Association, total arrivals for May 2000 were 18.1 percent more than during May 1999. And hotel occupancy rates reached 81 percent compared with 76 percent a year earlier. HKTA also reported that Hong Kong's actual hotel stock numbered 91 properties with 35,102 rooms as of June 1999. The association estimated that by year-end, those figures will grow to 100 hotels offering 39,144 rooms.