Hong Kong Hotels Facing Overcapacity

Hong Kong hotels are facing a serious problem of overcapacity that is likely to become more severe over the coming years, according to Henry Tsai of the School of Hotel and Tourism Management.

Tsai is co-researcher of a recently published research paper, that noted although there is consistently high demand for hotels in the city, demand forecasts indicate a significant shortfall in likely booking when compared to the rooms available. The failure to implement strategies to improve this situation, the paper suggests, will decrease the profitability of Hong Kong's hotels, and significantly increase their operational risks.

Hong Kong's hotels currently face a number of challenges and opportunities. The paper's researchers point to "the rapid growth of counterparts both in Macau and Guangdong province" as one of these challenges. For example, the number of star-rated hotels in Guangdong has increased at a rate of 15.2% per year over the past decade, presenting increasingly fierce competition for Hong Kong.

At the same time, however, policies such as the introduction of the Individual Visitor Scheme for mainland Chinese tourists in 2003 and the anticipated completion of the Hong Kong-Zhuhai-Macau Bridge in 2015-16 should increase the number of visitors from mainland China. This, the researchers note, will "help facilitate economic activity and tourism development in Hong Kong."

It is predicted Hong Kong will have almost 70,000 hotel rooms in 2013, an increase of more than 17 percent over four years. Yet despite that increase, the researchers noted the occupancy rate "has not shown a similar promising upward trend" and has remained relatively steady at around 85 percent over the past decade. Hence, it was important to determine whether Hong Kong is likely to face the problems of over- or under-capacity in the coming years.

The researchers hope the various findings in their paper will prompt hotel industry stakeholders into carefully re-examining their development plans, both now and in the future. They advise hotel developers and planning officials to carefully monitor hotel occupancy levels and tourist arrivals and maintain a "sustainable operating environment for the Hong Kong hotel industry".