China visitor arrivals continued to fall, while greater China recovered -

Hong Kong, which recently ranked 15th in the World Economic Forum Travel & Tourism Competitiveness Index 2013, received more than 12.7 million visitors in the first quarter of 2013, reflecting a 13.5% yearon-year (YOY) growth from 2012.

HONG KONG

The mainland Chinese market accounted for 74.6% of total visitor arrivals, which registered a YOY growth of 20.3%.

The Russian market posted the second highest YOY growth of 22.5%, attributable to the Hong Kong Tourism Board's promotional efforts in the country.

Among the top five source markets, only mainland China and Taiwan recorded positive YOY growth, with the Taiwan market growing moderately by 3.9%. South Korea, USA and Japan all recorded YOY decreases.

Given the economic situation, the US market decreased by 4.9% YOY, while the South Korean market contracted by 7.1% YOY. Due to a territorial dispute over Diaoyu islands (also known as Senkaku islands in Japan), visitor arrivals from Japan continued to decline by 22.3% YOY.

Among other markets, the Thailand market grew by 11.6% YOY, thanks to a booming economy and a strong Thai baht. However, the European market declined, given the protracted government austerity measures and knock-on effects on
consumer spending, as well as lacklustre commercial activity among exporters to and from China. For Oceania markets,
Australia and New Zealand declined by 5.3% YOY and 4.3% YOY, respectively.

The share of overnight visitor arrivals declined from 49.5% in the first quarter of 2012 to 46.9% over the same period in 2013. More Chinese visitors stayed overnight, with numbers increasing by 13.8% YOY.

This increase is likely due to recent legislation on parallel trading, including milk powder allowances that reduce the number of same-day cross-border traffic.

Stimulated by the announcement of higher cash allowances for Macau residents, the Macau market also recorded a 12.0% YOY increase in total visitor arrivals and a 13.6% YOY rise in overnight visitor arrivals.

On the other hand, Japanese overnight visitor arrivals decreased by 27.8% YOY, which led to a 6.0% YOY reduction in total Japanese visitor arrivals.

Due to the heated political dispute between China and Japan, as well as the depreciation of the Japanese yen, the number of Japanese visitors to Hong Kong is expected to decline throughout 2013.

Several hotel owners in Hong Kong have listed, or are in the process of listing, their holdings on the Hong Kong Stock Exchange.

Langham Hospitality Investment (LHI), an investment trust controlled by Great Eagle Holdings Limited, raised approximately US$550 million in an initial public offering (IPO) launched in May. Great Eagle owns The Langham, Langham Place Hong Kong and Eaton Hong Kong. LHI aims to use 88% of the IPO proceeds to purchase all three hotels from Great Eagle Holdings and using the remaining funds to improve the properties.

After Great Eagle announced its plans, NW Hotel Investment, backed by New World Development and Macau Legend Development, has been looking to spin off some of its assets; meanwhile, Hopewell Holdings was also planning to raise approximately US$778 million in an IPO of its real estate division.

While the Hong Kong hotel market continues to enjoy very high RevPAR levels, more and more owners are looking into divesting some of their assets. Yet, the debut of Langham Hospitality Investment was muted and shares have been trading below the listing price.

At the same time, a question arises as to why owners are looking to exit at this particular point in time – could it be the supply pipeline, a potential slowdown in mainland visitor arrivals, an eventual increase in interest rates or something entirely different? Plans for NW Hotels' IPO have meanwhile been delayed and Hopewell aborted their plans altogether.

Read full report HERE.


About Daniel J Voellm
Daniel J. Voellm is Managing Director of HVS Hong Kong and 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.

About PuReaNae Jang
PuReaNae Jang is an analyst of HVS Hong Kong, working primarily on hotel consulting assignments including Market Studies and Feasibility Studies in the Asia Pacific region.

Graduating with an Honors Bachelor of Social Science degree from the Hong Kong Polytechnic University and with previous working experiences in hotel operations, PuReaNae brings a comprehensive knowledge of the hospitality industry.