Four in 10 Hong Kong hotel staff may lose jobs as coronavirus outbreak deters the few remaining visitors still braving the city’s protest rallies
- Unemployment rate in Hong Kong’s hotel industry could reach “up to 40 per cent” due to Wuhan coronavirus and protests, hoteliers say
- While the larger hoteliers could afford to cut their rates, the smaller operators cannot afford to run their businesses below cost
Four in 10 of Hong Kong’s hotel staff may lose their jobs in the coming months, as travel restrictions against the coronavirus outbreak could become the final nail for an industry that is already struggling from shrinking tourism after nearly eight months of anti-government protests.
The unemployment rate in the industry, which employed 44,500 people in the city as of the end of 2019, could soar to 40 per cent, said Edwin Leong Siu-hung, founder of property developer Tai Hung Fai Enterprises, who counts four hotels in his real estate portfolio. Small hotels and family-run inns would be particularly susceptible to the downturn in business, he said.
The unemployment rate in the hotels and accommodation industry was 3.4 per cent, or around 1,500 people, in the fourth quarter of 2019, nearly double the jobless rate a year earlier, according to the government’s General Household Survey which sampled 74,000 individuals.
Leong, 68, owns the four-star Hotel Indigo in Wan Chai, the three-star Holiday Inn Express in Mong Kok, the Sharma Island in North Point and the TraveLodge Kowloon in Jordan. His newest property, the Hotel 1936, is scheduled to open this year in Prince Edward.
He is not alone in forecasting a slump. William Cheng, the chairman and chief executive of Magnificent Hotel Investments with nine hotels in its portfolio, expects to see a further drop in occupancy after February, as the full impact of the Wuhan coronavirus outbreak kicks in after the Lunar New Year holiday.
“The outbreak hasn’t [completely] surfaced yet in the hotel industry. But the impact will be reflected in February. A lot of hotels across the city may close,” said Cheng. “Traditionally, February is the worst month of the year for the hotel industry. With all the current problems, hotel occupancy [across Hong Kong] may only be 30 per cent or less. It’s still possible for large hotels to break even, but smaller hotels are less cost effective, and therefore must be suffering.”
Hotels could consider lowering costs by offering fewer rooms and closing off a few floors, or allocating staff to other locations, said Leong.
More than 17,000 cases of infection have been confirmed in the mainland, far surpassing the number from the 2003 severe acute respiratory syndrome (Sars) epidemic. The current death toll has reached 362 as of Monday noon local time, according to China’s National Health Commission.
Hong Kong has reduced cross-border travel with the rest of China as it adopts tougher measures to contain the spread of the deadly Wuhan coronavirus, starting with the shutdown of the two railways and suspension of new visas to individual mainland tourists.
The hotel market appeared to settle slightly following the events in 2019, but if the incoming visitors continue to drop with the outbreak of the virus, this will put further pressure on all hotels, said Edmond Wong, director of valuation and advisory services for hotels at CBRE Hong Kong.
Room rates at Best Western have dropped around 70 per cent from an average price of HK$1,000, before the city’s hotel industry started to suffer in August, said Cheng. Revenues have also dropped around 70 per cent over the past few months, compared to the same period in the previous year.
However, Cheng is optimistic about the longer-term prospects of Hong Kong's hotel market after July when the high season comes.
“Being in the business, you expect these ups and downs. It’s been only six months since the industry started suffering in August. Once these things are over, the recovery will be very strong,” he said.