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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Passengers on the Peak Tram look at the Hong Kong skyline. The city’s tourism industry is experiencing its sharpest downturn since the Sars epidemic in 2003. Photo: Bloomberg

Published: 6:00am, 17 Sep 2019Updated: 6:56am, 17 Sep 2019

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.

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”.