Nevertheless, the new supply is expected to slow room rate growth, which in turn will hinder improvement in hotel yields.

'Without question, 2005 has been a strong year for the industry, but its yield has not yet returned to 1996's level, the best year on record,' Mr Lu said.

'The industry still has some leeway for rate increases, which I expect at about 10 per cent next year after 15 per cent growth this year.'

New tourist beds would flood the middle-price market next year, but they were likely to be taken up by an extra four million visitors, Mr Lu said, citing the Hong Kong Tourism Board's forecast of 27 million visitors next year against 23 million this year.

However, top-end accommodation will shrink by almost 1,300 rooms after the New Year with the Hyatt Regency Hong Kong in Tsim Sha Tsui closing down and the Mandarin Oriental in Central undergoing an eight-month, US$140 million renovation.

The Hyatt Regency, which will be demolished to make way for a retail and office complex, achieved occupancy and room rate records in the nine months to September. Room rates were 15.5 per cent higher at an average of $946, while occupancies reached about 84.5 per cent.

In Mongkok, the upmarket Langham Place, a Great Eagle Holdings property, is confident that the robust growth will spill into next year.

Hotel manager Jeffrey van Vorsselen based his optimism on the hotel's strong performance since its opening in August last year which has seen its 665 guestrooms 75 per cent occupied this year.

The average room rate was about $1,000 per day.

'This is the best year for the hotel industry since 1997,' Mr Vorsselen said.

'We are seeing strong and steady growth in the demand for quality accommodation in Hong Kong, with the growth contributed by long-haul business travellers using the city as their base for travelling to China and other parts of Southeast Asia.'

He said there was a marked increase in the number of long-haul travellers spending holidays in Hong Kong, especially those from traditional markets such as Japan.

Next year, Mr Vorsselen expected Langham Place's occupancy to climb a further 10 percentage points to 85 per cent and its average room rate to increase 20 per cent.

The deluxe Four Seasons Hotel at Hong Kong Station, which received its first guests in September, expects to benefit from regulars from the Mandarin and the Hyatt Regency, according to general manager William Mackay.

'It's inevitable,' Mr Mackay said. 'The supply of high-end hotel rooms is shrinking.'

He said the 399-room Four Seasons had a strong debut, running a full house during some periods in the past two months.

'This is very unusual for an opening hotel,' he said. 'Hotel occupancy is a good barometer of the economy, we have a strong market for every player.'

The hospitality and tourism sector is not free of worries, however. Yu Tat-kong, the general manager of the four-star Miramar Hotel on Nathan Road which has enjoyed 90 per cent occupancy of its 525 rooms so far this year, said the biggest threat to the industry was an outbreak of avian flu.