|Quarterly hotel market update: Q1 - Hong Kong, Macau & China.|
Monday, 2nd April 2012
Source : Daniel J. Voellm & Cathy Luo ~ HVS Hong Kong
Despite turbulence in the global economy, 2011 was a triumphant year for the region, with markets setting new records one after the other.
Total visitor arrivals to Hong Kong amounted to 11.4 million in the last quarter of 2011, reflecting a 16.7% year-on-year (YOY) increase and setting a new record for visitor arrivals in a single quarter.
Mainland Chinese remain the key driving factor behind robust growth, with arrivals growing by 24.7% to reach a record high of 7.7 million, representing approximately 67.0% of total visitor arrivals. Feeder markets continued to diversify in the last quarter among neighbouring countries in the region. Among the top five feeder markets, Singapore posted 10.3% YOY growth, driven by favourable exchange rates.
The Philippines and South Korea also recorded double-digit growth YOY. Facilitated by the recovery from the Tōhoku earthquake and a strong yen, travel sentiment among Japanese visitors improved in the last quarter, registering 5.9% growth YOY.
Hong Kong also set a new milestone for visitor arrivals: full-year total visitor arrivals topped 41.9 million, representing 16.4% growth YOY.
The top five feeder markets for 2011 remained the same as for the previous year: China, Taiwan, Japan, USA and South Korea. Hong Kong’s economy and tourism industry have benefited tremendously from the territory’s proximity to China over the past few years and are currently greatly dependent on the Chinese market.
Given the unsteady global economic environment and recent economic data that further indicated a slowdown in China’s economy, Hong Kong’s economic and tourism industry growth is expected to moderate in 2012.
Furthermore, the city faces increasing competition from neighbouring markets such as Macau and Taiwan, which are both popular destinations for mainland Chinese visitors. The Hong Kong Tourism Bureau estimates visitor arrival growth to slow to single digits in 2012.
In the last quarter of 2011, 52.4% of visitors to Hong Kong stayed overnight – a trend that is further declining as a result of an increasing number of same-day visitor arrivals from China, and travellers’ struggles in finding hotel accommodation as
marketwide occupancy climbed to approximately 92.0%.
Overnight visitor arrivals from Singapore registered the strongest Japan Taiwan USA Others Mainland China Singapore YOY Change growth rate at 7.3% YOY in the last quarter.
For the full year of 2011, overnight visitor arrivals grew by 11.1% to 22.3 million, representing 53.2% of total visitor arrivals. This figure is slightly lower than the 55.7% recorded in 2010.
The high-end hotel market in Hong Kong posted record RevPAR performance for eight out of 12 months in 2011, with November achieving the second-highest monthly RevPAR performance on record. YOY monthly average rate growth ranged from 10.6% to 16.9%. Average rate peaked in October at HK$2,564, driven by strong demand from the mainland Chinese market. Occupancy performance strengthened in the last quarter and passed the 90% mark in November and December, a slight improvement from 2010.
The high-tariff A market registered 84.8% occupancy performance in 2011, a 3.6 percentage point growth YOY. The average rate also climbed 13.4%, driven by strong occupancy levels. RevPAR performance for the full year registered at an all-time high of HK$1,895 in 2011.
In 2012, an estimated 29 new hotels totalling 5,854 rooms are expected to enter the Hong Kong market. The outlook for occupancy levels remains positive, given the healthy demand from China. The anticipated slowdown in China’s economy and a soft global economy will prevent rapid expansion in corporate travel budgets. Reliant on market compression, average rate growth in 2012 is anticipated to remain healthy, with potential softening towards the end of the year.
More than 4.4 million mainland Chinese visitors visited Macau in the last quarter of 2011, the highest ever.
Strong visitor arrivals from mainland China was supported by increased capacity at gaming tables and the appreciation of the Renminbi.
Hong Kong visitor arrival levels were mature and resilient.
Demand from Japan increased in the last quarter as sentiment improved, with Japanese visitor arrivals recording 11.0% YOY growth.
Travel demand from Southeast Asian countries such as the Philippines, Singapore and Vietnam posted double-digit YOY growth in the last quarter.
Thailand, on the other hand, saw visitor arrivals decline by 18.2%, due to flooding in its key centres of economic activity.
Mainland China, Hong Kong and Taiwan remained the top three feeder markets for Macau in 2011.
South Korea surpassed Malaysia and Japan to become the fourth-largest feeder market, owing to a strong Korean won and the increased accessibility of Macau.
About the Authors
Daniel J. Voellm is Managing Director of HVS Hong Kong, has provided advice in major markets across Asia-Pacific. Prior to heading the Hong Kong office, Dan was Vice President at HVS' global headquarters in New York conducting a wide range of appraisals, market studies and underwriting due diligence services.
Dan brings a strong understanding of the hospitality industry to HVS. His experience in hotel and food and beverage operations in Germany, Switzerland, England and the United States is complemented by an Honours Bachelor of Science Degree from Ecole hôtelière de Lausanne in Switzerland. Dan works closely with key institutional and private owners of hotel properties, financiers, developers and investors. Dan further advises on property and concept development and strategy.
Cathy Luo is an analyst of HVS Hong Kong, working primarily on hotel consulting assignments including Market Studies and Feasibility Studies in the Asia Pacific region. Prior to joining HVS, Cathy worked in Revenue Management with Marriott Hotels in Dubai performing analysis and providing recommendations to support hotel strategy.
Graduating with a an Honours Bachelor of Arts degree from Glion Institute of Higher Education and with previous working experiences in hotel operations, Cathy brings a comprehensive knowledge of the hospitality industry. Cathy has advised on projects in China, Singapore and Cambodia.