Hong Kong's tourism, events and accommodation sectors have been powered by a wave of initiatives in the last few months.

These include the Expression of Interest (EOI) campaigns for the government's newly planned eco and yacht tourism development sites, to the sold-out Football Festival with Liverpool, AC Milan, Tottenham Hotspur and Arsenal gracing the city with their presence.

The Ani-Com & Games 2025 in July attracted thousands of visitors, as did the Saudi Super Cup in August, as Hong Kong and the Middle East deepen their collaboration. The government launched its 'Hostels in the City' scheme on 21 July 2025, to facilitate and incentivise private investment in the conversion of underperforming hotels and commercial buildings to student accommodation.

Adding to the city's 330 hotels, the 274-room Motto by Hilton Hong Kong SOHO opened its doors, providing a new lifestyle offering and setting a benchmark in terms of sustainability, placemaking, innovation and design. It marks MOTTO by Hilton's first entry in Asia-Pacific.

On the F&B front, US pretzel brand Auntie Anne's opened its second store in Hong Kong in Causeway Bay, showcasing how brands are positioning themselves to offer new experiences to customers.

The hotel investment market is witnessing a notable increase in activity, and a stroll around Tsim Sha Tsui at weekends demonstrates that visitor numbers are up and the streets are buzzing. Yet the challenge remains in translating that into operational performance across the hotel, retail and F&B sectors.

Visitor numbers continue upward trajectory

From January to June, the city had 23.64 million visitors, up nearly 11.7% from the same period in 2024. Overnight visitors accounted for 11.28 million, up 7%. 65% (11.3 million) were from the Mainland, and 35% (3.95 million) from other markets.

“Mainland overnight visitors were up 3.3%, while non-mainland markets saw a wider increase of 14.7%, reflecting a proportional uplift of international tourists coming to the city.”

Hotel performance still seeking the sweet spot to increase daily rates

H1 2025:

• Occupancy 85% (↑ 2%)
• Average Daily Rate (ADR) HKD 1,220 (↓ 10.8%) 
• RevPAR HKD 1,037 (↓ 8.6%)

For the first half of 2025, hotel occupancy was 85% against 83% for the same period in 2024. Despite a stronger occupancy rate in Q1 of 88%, performance in Q2 trended seasonally lower, with 86%, 82% and 80% recorded in April, May & June respectively, averaging 83%. Nevertheless, the average Q2 figures were marginally up, 2% on 2024, although June trailed by 1%.

Hotel Occupancy | H1 2025 vs FY 2024

Cost-conscious visitors curb daily rates

The market continues to face downward pressure on daily rates, as consumers remain cost-conscious. Average Daily Rates (ADR) were at HKD1,220, down 10.8% from H1's 2024 figure of HKD1,368, resulting in a revenue per available room (RevPAR) of HKD1,037 versus H1 2024 of HKD1,135.

The most significant drop has been in the midscale / Medium Tariff Sector, which saw a year-on year decline of 19.9% to HKD 573, the luxury / upper upscale (High Tariff A) and the 4-star High Tariff B sectors dropped almost 9% year-on-year to HKD2,111 and HKD974 respectively, reflecting the continued trend of visitors being more cautious with their spending.

“The city has seen robust performance in terms of occupancy, but the daily rates' downward trend continues to weigh on RevPAR.”

Somewhat bucking the trend, the increase in long-haul travel and events has driven occupancy improvements for a select few luxury operators across the city leading to year-on-year RevPAR growth for them coming off a lower base last year, despite continued pressure on daily rates.

However, a significant challenge still lies in combatting reduced non-room revenue, especially with banqueting in decline.

Hotel average daily rates (HKD) | H1 2025 vs FY 2024

Investment is warming up

While several marketing campaigns and tender processes kicked off for the sale of various hotels, Q2 itself was fairly limited in terms of investment deals, reflecting a total H1 figure of just over HKD3 billion. Sales included the 800-key Winland 800 Hotel and 100-key MK Stay, and the transfer of Hotel Cozi Harbourview to Nanyang Commercial Bank.. On the platform side, Rava Partners, a subsidiary of Hillhouse Capital, took a majority stake in Dash Living for up to USD150 million.

Shifting across Q2 and Q3, The Henry sold for HKD185 million and Hotel Ease Mong Kok was recently acquired for HKD435 million – with both hotels targeted for student accommodation conversion. With various deals pending at the time of writing, the market will see additional transactions.

The government's Hostels in the City scheme is the catalyst as investors target under-performing hotels and Grade B and C office assets for conversion to student hostels. The large anticipated supply shortfall, predictable cash flow, lower entry pricing and government policy support, is driving local and international investment interest in the sector.

“The government’s inclusion of student hostels under the expanded definition of hotels in commercial zoning guidelines, and the related policy amendments, enable full or partial conversion of commercial buildings without a lengthy approval process and with the flexibility to better utilise the space. The changes eliminate uncertainty, time costs and approval risks for private investors.”

Meanwhile , boutique and major hotel investors and operators sense an opportunity to curate new offerings in the city, as recent downward pricing adjustments open the door to improved returns.

While challenges on rate and non-room revenue remain, as the city enters the busy final third of the year the packed schedule of events, conferences, major holidays and policy support are expected to provide an uplift in hotel operational performance and investment.

Shaman Chellaram
Senior Director | Colliers Asia
Proven hotel and commercial real estate investment and advisory professional with regional and international coverage across key gateway and resort markets.

colliers.com/en-hk