According to the latest Hotel Market View H1 Report, visitor arrivals to Hong Kong maintained strong momentum in H1 2019, rising to close to 35 million, an increase of almost 14% y-o-y.

Although visitor arrivals continued to grow in H1 2019, citywide occupancy fell by 100 bps to 90% as the rise in overnight visitors was insufficient to sustain the current level of high hotel occupancy.

More than 1,700 new hotel rooms were added to the hotel market in H1 2019, compared to full-year new supply of 2,530 new rooms in 2018. CBRE expects new hotel supply in 2019 to total around 3,000 rooms, a slight increase on the 2018 figure. The forecast for 2020 is around 4,000 rooms, which could exert downward pressure on occupancy.

The city’s sociopolitical unrest will severely affect hotel performance in H2 2019. Citywide Revenue per Available Room (RevPAR) could drop by more than 15% for full-year 2019.

The RevPAR performance varied across different segments but has displayed signs of decline since early 2018. RevPAR fell by (1.98%) y-o-y for high tariff A hotels; rose by 0.31% y-o-y for high tariff B hotels; and declined by (0.79%) y-o-y for medium tariff hotels.

“The market outlook for the rest of the year has weakened substantially due to the U.S.-China trade war and ongoing local sociopolitical unrest, both of which are likely to severely impact the retail and tourism sectors,” said Edmond Wong, Director, Valuations & Advisory Services, Hotels, Hong Kong.

“Hotel investment activity remained quiet in H1 2019, with just a few small- and medium-sized assets changing hands. The limited number of quality assets for sale and the price gap between purchasers and vendors continued to deter transactions. Yield of hotel investment was flat during H1 2019 and remained at low levels. We expect investment activity to deteriorate over the remainder of the year,” continued Wong.

For more information about CBRE Hotel Market View H1 Report, click here