Owners of underperforming hotels see redevelopment as a quick fix to city’s housing woes after CK Assets’ proposal
- Hotel owners say room occupancy rates continue to languish despite a recovery in tourists from the mainland
- Non-core hotels are not seeing high occupancy rates despite the opening of the Hong Kong-Zhuhai-Macau Bridge and high-speed railway
An increasing number of hotel owners in Hong Kong’s non-core areas are considering rebuilding their property into residential use while viewing it as a quick fix for the city’s perennial housing shortfall, following CK Asset Holdings’ proposal to redevelop its 1,100 room hotel into a housing project.
“Why on earth do we have so many rooms in industrial and outlying areas that get so few tourists while so many Hongkongers are still waiting for a chance to buy their own house?” asked William Cheng Kai-man, chairman of Magnificent Estates, which owns eight hotels, six of which are in the city’s prime districts, including Causeway Bay, Sheung Wan and Tsim Sha Tsui.
Hotel room rates in the city’s outlying areas have been hit by a sharp decline in mainland group tours after such shopping sprees were banned in 2015 as they contributed about 70 per cent to the occupancy of these non-core area hotels, according to Cheng.
Hotel owners fear their occupancy rates continue to languish despite a recovery in the number of tourists from the mainland.
“[Many] rooms get last-minute cancellations and price competition in these areas is unhealthy,” Cheng added.
Rooms at the 882-unit, three-star Rambler Oasis Hotel in Tsing Yi, owned by CK Asset, were available for as low as HK$380 per night on Monday, according to booking.com.
Despite the recovery in visitor arrivals, tourism sector legislator Yiu Si-wing pointed out that more than half of the tourists from the mainland did not stay overnight in Hong Kong and just came for day trips for shopping or business.
“With improvements in transport, it is much easier and faster to arrive in the city centre, making it less attractive to take a detour and stay in outlying hotels,” said David Ji, head of research and consultancy at Knight Frank.
Denis Ma, head of research at JLL said that he did not see these non-core hotels generating high occupancy rates despite the opening of the Hong Kong-Zhuhai-Macau Bridge and the high-speed railway.
Chris Hoong, managing director of Far East Consortium International, which owns nine hotels in the city, including two in Tsuen Wan and one each in Tsing Yi and Kwun Tong, said that redevelopment is not a decision that you can make easily and a number of factors have to be taken into consideration.
“You have to pay the land premium for conversion into residential use, which is a cost you have to bear. And then there is the uncertainty in the residential market.”
Hoong added that those hotel owners who stick with the business will benefit from rising room rates. “When more landlords convert their hotels into other uses, supplies will shrink and room rates will increase. Therefore, the income stream from hotels will be even stronger. That is the opportunity cost you have to consider,” he said.
But CK Assets, which is now run by retired tycoon Li Ka-shing’s elder son Victor Li Tsar-kuoi, has hedged its bet on the redevelopment option.
The city’s second largest builder by market capitalisation announced on January 9 plans to redevelop its 1,100-room Harbour Plaza Resort City hotel in Tin Shui Wai, in the New Territories which charges around HK$500 per night, into a dense housing estate accommodating some 5,000 dwellings, according to a document filed with the Town Planning Board.
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If the proposal gets the nod, the new flats will account for nearly 30 per cent of the government’s housing supply for the financial year ending March 31.
CK Asset said in its application that the development was “totally in line with the government’s latest policies to increase housing supply.”
“Such a swap is a good deal for developers betting on the city’s housing market in three to four years,” said JLL’s Ma.
