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Exterior of Four Seasons Hotel in Central. Photo: David Wong

Outlook for major Hong Kong developers still gloomy as Covid-19 travel restrictions batter hotel, shopping mall businesses

  • Sun Hung Kai Properties, Hysan Development and Sino Land see profits at their hotel and shopping centre businesses tumble as travel restrictions keep visitors at bay
  • Analysts and industry executives see little relief on the horizon with no signs of borders being reopened any time soon
There is still no light at the end of the tunnel for Hong Kong’s major property developers after a painful year in which their hotel and retail businesses took a particular drubbing, according to analysts and industry figures.
Three of the city’s biggest commercial property landlords revealed sizeable falls in profit for 2020 as travel restrictions kept visitors at bay and brought the city’s economy to a virtual standstill.

“Various domestic and external challenges will continue to weigh on the economy of Hong Kong in the short term,” said Raymond Kwok Ping-luen, chairman and managing director of Sun Hung Kai Properties, the city’s biggest developer by market value, in an interim results filing to the stock exchange on Thursday.

The developer owns upmarket hotels like the Four Seasons, Ritz Carlton and the Hyatt Centric Victoria Harbour as well as luxury shopping centres including IFC Mall in Central.

“Shopping centre business will continue to be affected until the travel restrictions with the mainland are removed … hotel business is likely to remain tough as long as cross-border global travel is restricted,” Kwok said.

The company’s hotels recorded a loss of HK$228 million (US$29.4 million) for the year. That compared to profit of HK$197 million in 2019, itself a tough year as Hong Kong found itself mired in months of anti-government protests that hurt businesses.

Hong Kong has practically shut its borders to tourist arrivals for the last year to contain the spread of the coronavirus, with no signs of normal travel resuming soon.

“As we enter the second month of 2021, we still have little clarity on our future,” said Irene Lee Yun-lien, who chairs Hysan Development, the biggest landlord in the city’s shopping district of Causeway Bay, in its annual results filing on Thursday.

Hysan’s underlying profit in 2020 came to HK$2.39 billion, down 7.3 per cent year-on-year.

Amid coronavirus restrictions, visitor arrivals in Hong Kong plummeted nearly 94 per cent last year to just 3.57 million, a 36-year low, according to the Tourism Board.

Hong Kong retail sales plunged by a record 24.3 per cent from the previous year, the worst performance for the sector since records began in 2004.

“The developers are clearly not optimistic. They won’t get out of the tunnel until the city’s economy has really recovered,” said Alvin Cheung Chi-wai, associate director at Prudential Brokerage.

Financial Secretary Paul Chan Mo-po on Wednesday warned of a record deficit of HK$257.6 billion for the current fiscal year and more annual deficits ahead as he scaled down relief measures by a third.

But vaccinations in the city and measures designed to boost the economy and consumption are seen as providing some light on the horizon.

Hong Kong will for the first time give residents HK$5,000 in digital vouchers to encourage local spending as part of plans unveiled in the latest budget.

“There is still a lot of uncertainty for the developers. Their hotel business will be quite challenging in particular,” said Raymond Cheng, managing director at CGS-CIMB Securities.

“The city’s retail for sure will be better this year with the coming government coupons and easing of social distance measures. But until the cross-border restriction is lifted, we cannot see a full recovery.”

Sino Land, another major developer in the city, is betting on recovery coming from the further integration of Hong Kong and mainland China, the only major economy to see positive growth in 2020.

“[China’s] new five-year plan supports further integration of Hong Kong with the development of the country … allowing the city to leverage China’s economic growth and to support a stable economic environment for Hong Kong,” said Sino Land’s chairman, Robert Ng Chee Siong, in a half-year results filing on Thursday.

Sino Land reported underlying profit down 21 per cent at HK$2.14 billion for the six months ended December 31.

Sun Hung Kai Properties reported an underlying profit of HK$17.48 billion, up 30 per cent, citing an increase in residential property sales as the main reason.

Hong Kong’s home prices have been resilient in a virus-hit year, ending 0.02 per cent higher in 2020 and defying the city’s 6.1 per cent economic contraction.
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