The onslaught of social unrest and coronavirus pandemic have changed the travel patterns in Hong Kong, bringing along permanent changes to the hotel industry. It’s hard to see a swift rebound from this one-two punch. Visitor arrivals fell 52.7 per cent to 3.2 million in January 2020 from a year earlier, according to the latest data from the Hong Kong Tourism Board, with mainland Chinese arrivals shrinking by 54.2 per cent. The number of non-mainland visitors also declined, by 46 per cent year on year, showing that the tourism sector has been affected across the board. Before the two crises, the Hong Kong tourism and hospitality sector had already been undergoing a fundamental structural shift over the past 20 years with a notable transformation of travel patterns. Hong Kong airport hotel operator Regal staring at abyss as it takes a blow from coronavirus and protests Overseas visitors used to stay in Hong Kong for more than 4 nights per visit, but that had fallen to just 3 nights. Overnight visitors, who used to account for over half of the total before 2012, now constituted about three-fifths of arrivals. Hotel room occupancy rate, which averaged 91 per cent in 2018, started to crumble in the second half of 2019 amid the protracted social unrest. In January, it fell to an abysmal 59 per cent, versus 92 per cent in the same month last year. The coronavirus outbreak has echoed the pessimistic sentiment for the hospitality sector, with anti-contagion measures like immigration controls keeping most inbound visitors away from the city and elsewhere. The average occupancy rate is at single-digit levels during the current outbreak, according to the Federation of Hong Kong Hotel Owners. Coronavirus: most Hong Kong hotels record single-digit occupancy as industry faces ‘life or death’ struggle to survive With Covid-19 declared as a global pandemic, hotels are certainly in survival mode now. Unlike the previous public health crisis, hotel operators in Hong Kong might not see a V-shaped recovery in operating performance this time. After the Sars (severe acute respiratory syndrome) outbreak in 2003, it took five months for the average occupancy rate to reach its pre-crisis levels, thansk partially to the introduction of Individual Visit Scheme. This time, however, is different. While there are signs of demand in the short-term, we are not expecting occupancy to easily rebound to the 80 per cent mark, even after the pandemic is over. Hong Kong hoteliers say market’s a ‘disaster’ as 90 per cent of rooms stay vacant amid viral outbreak Some hotels would be buoyed by an uptick in occupancy rate from late March, with a considerable number of returning overseas students needing short-term accommodation for self quarantine. Some offering discounted short-stay plans are enjoying full bookings. Unfortunately, this will not solve the problem of a permanent structural change that some inbound visitors are not returning to stay overnight. Fifteen new hotels commenced operation across the city last year and another six are planned to open this year at one of the most challenging times ever. While many will survive the pandemic, we may still see a few changes in the market. Hong Kong hotels target staycations as the city’s tourism industry endures its worst slump since Sars First, there will be mergers and acquisitions of hotels following an uneven pandemic impact across countries. This could happen between hotel groups or investors when they see opportunities for longer term benefits, or in the form of bailouts. Second, hotels might downsize their operations in Hong Kong via partial or full conversion or redevelopment into other commercial premises. With office and retail rents no longer skyrocketing, any incurred land premium could be lower compared to previous few years. Third, hotels currently under planning or construction might allocate more space to facilities or services other than rooms. These include food and beverage, wellness facilities and parking bays. In general, about 35 per cent of hotel revenue in Hong Kong comes from the provision of these services. Among high-end hotels, it can surprisingly go up to 50 per cent. Moreover, some hotels are capitalising on the emerging trend of staycations by targeting the local market. Like Sars, we believe the Covid-19 disease will eventually pass. But there will be a new norm, as hotel owners and operators adapt to both the temporary structural break as well as permanent changes in the industry. Martin Wong is associate director of research & consultancy for Greater China at Knight Frank Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). 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