Murray Building sale highlights hotel yield appeal

Harbour Centre Development's higher-than-expected offer for the Murray Building in Central underscores developers' increasing optimism about hotel investment.

The company bought the property for HK$4.4 billion on Wednesday, aiming to convert it into a hotel.

"If we include the cost of converting the building into a hotel development, the investment cost of each room would be about HK$19 million," said Alfred Lau, a property analyst at Bocom International, adding that set a record for hotel rooms in Hong Kong.

Harbour Centre might want to build a landmark project in order to strengthen its hotel brand, Lau said.

The strong bidding for the building indicates that Harbour Centre is optimistic about the upside potential of hotels in the city.

Consultancy Knight Frank, in its annual "Greater China Hotel" report, said Hong Kong was expected this year to draw more international overnight visitors than Beijing, Shanghai, Guangzhou and Macau. However, the city's five-star hotel stock is the second-lowest among these cities, making the room rates the most expensive in this group.

In the first half of this year, no new five-star hotels opened in Hong Kong. Knight Frank expects the occupancy rate to remain stable due to the limited supply of five-star hotels.