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Hong Kong’s hotel sector is in free fall as violent protests keep tourists from the mainland, and elsewhere, away
- In a matter of months, the strong fundamentals of Hong Kong’s tourism industry have been dealt a massive blow. The hotel market is now a proxy for the perceived stability of Asia’s financial hub, and things don’t look good
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Global property markets have cooled this year. Leasing activity and transaction volumes have slowed as investors turn cautious and demand from occupiers weakens.
However, in Hong Kong’s hotel market, a modest decline in occupancy and room rates in the first half of the year has exploded into a full-blown crisis as the mass anti-government protests that erupted in June descend into violence.
The city’s tourism industry, a pillar of the economy, is experiencing its sharpest downturn since the Sars epidemic in 2003. A 5 per cent year-on-year drop in tourist arrivals in July rapidly accelerated to a 40 per cent plunge in August, the steepest decline since May 2003, according to data from Bloomberg.
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What is more, the number of tour groups from the mainland – which usually account for almost 80 per cent of arrivals – plummeted 63 per cent year on year in August, and fell 90 per cent in the first 10 days of September.
At a time when the Asia-Pacific and Middle East are driving the growth in international tourism, a trend fuelled by Chinese outbound travel, Hong Kong has fallen dramatically out of favour. The city’s own government, which has been eager – too eager, in fact – to highlight the negative impact of the unrest on the economy, has acknowledged the scale of the damage.
In a blog post last week, Financial Secretary Paul Chan Mo-po said the protests had severely tarnished Hong Kong’s “image as a safe city and an international commercial, trade, aviation and financial hub”.
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