The View | Hong Kong hotel sector recovery elusive for unprepared investors

Signs of recovery in Hong Kong’s real estate industry are becoming more apparent, so much so that key indicators in parts of the sector are experiencing some of the fastest growth rates in the Asia-Pacific.

Another sign that the recovery has taken hold is the sharp increase in tourist arrivals

which, according to a report by Citigroup on July 21, are expected to reach 55 million this year. This would be almost on par with the number of visitors in 2019, although still significantly below the 65 million in 2018, just before Hong Kong suffered a succession of domestic and external shocks.

This makes the performance of its luxury hotels all the more impressive. According to data from STR, part of CoStar Group, average daily rates for luxury and upper upscale hotels in the first half of this year were 1.3 per cent higher than in the corresponding period in 2018. For the market as a whole, rates were just 1.3 per cent lower. “There were three months – January, February and May – when rates were actually higher,” said Jesper Palmqvist, regional vice-president for Asia-Pacific at STR.

The question is whether investors have the patience to keep watching and, if not, whether they have the expertise to exploit opportunities that involve repositioning and even repurposing hotels.