Several proposed hotel developments are expected to be put on hold because of the unfavourable market climate for the sector, consultant JLW TransAct says. Some big developments also were under pressure due to rising loan interest repayments and the overall downturn in Hong Kong's property market, it said. 'Certain hotel developers will face a testing time in the near future, although generally gearing levels in Hong Kong are traditionally low.' More than 12,000 new hotel rooms were in various stages of planning, most targeted for mid-range travellers, it reported. But it said many of the proposed projects were not expected to proceed in the short term or medium term. JLW TransAct said 21 projects were under construction, comprising 7,863 rooms, of which 72.7 per cent were in the medium-tariff range. Another 19 projects were proposed, comprising 5,714 rooms. 'All segments of the Hong Kong hotel market recorded decreases in occupancy during 1997,' JLW TransAct regional director Peter Welch said. Occupancy was 75 per cent for the top grade, 80 per cent for high-tariff B-grade hotels, and 72 per cent for medium-tariff hotels. Mr Welch said only hotels in the top grade recorded an increase in average room rates last year, rising to US$226. High-tariff B-grade hotels averaged $134 and medium-tariff hotels $101. The slight decrease in occupancy in the high-tariff B-grade sector could be attributed to loss of the Japanese market and price competition, JLW TransAct said. The decline in occupancy for medium-tariff hotels was due to the loss of tour groups to other Asian destinations, such as Bangkok and Indonesia, which were now more price-competitive. In the past decade, room-supply growth had been strong in the medium-tariff, or three-star, segment, reflecting the increasing popularity of the mid-range hotel market, it said. 'Room supply in this market is set to further increase in the next two to three years, with a substantial number of new projects under construction or mooted,' it said. A large number of high-tariff B and medium-tariff hotels were expected to come on stream this year, dampening the prospect of any substantial growth in occupancy. Higher-end hotels could expect an increase in room occupancies, albeit at a slower rate than previous years, as the Hong Kong hotel market came to terms with the decrease in demand, it said. Due to the inherent nature of hotel investments, which required substantial capital, there had been few hotel transactions in Hong Kong. The most notable open-market transactions in the past years were the JW Marriott and Conrad hotels. The dominance of Hong Kong and mainland investors in the marketplace was evident when examining transactions in the past two years, JLW TransAct said. More recent hotel sales in Hong Kong had been settled on yields between 6 per cent and 8 per cent. Due to high land costs and strong overall performance of the industry, compared with the rest of Asia, transaction prices tended to be higher in Hong Kong than properties of similar quality elsewhere in the world, it said.