Redevelopment plan for five-star Hong Kong hotel divides opinion

Opinions are sharply divided over whether it makes sense to tear down and redevelop the eight-year-old Crowne Plaza hotel in Causeway Bay into a commercial complex as local residents express concern the move will further clog roads in the teeming Hong Kong district.

Property investment firm SEA Holdings, which is listed on the Hong Kong stock exchange and owns the property, recently applied to the Town Planning Board to demolish the 29-storey, five-star hotel with 263 rooms to build a 22-storey office tower with restaurants and shops.

Property consultants and some hotel staff questioned whether redevelopment made sense amid a property boom and given the building’s relatively young age. Local residents expressed concern the move would exacerbate traffic congestion and strain local infrastructure.

A source at the hotel said he was disappointed the owner was seeking to demolish the building. He said its occupancy rate hovered between 80 and 90 per cent and that it was sometimes full.

“The management contract with the InterContinental Hotels Group has two more years to run, but the redevelopment first has to be approved by the Town Planning Board,” he said. The group is responsible for managing the hotel. Its 10-year term expires in 2019.

Even though the days of the management contract are numbered, the source said, an investor had planned to open a Chinese restaurant at the hotel.

Federation of Hong Kong Hotel Owners executive director Michael Li Hon-shing said the redevelopment decision was commercially motivated. He said an office tower would be cheaper to manage and could generate more profit than a hotel.

“The hotel sector needs to constantly lower room rates in order to maintain an occupancy rate of 80 per cent,” he said. “The rates are the same today as they were 10 years ago. In Macau, there are plenty of hotels charging well over HK$2,000 per night, but many hotels in Hong Kong are struggling to charge this amount even when they’re in pretty good locations.”

But Ricky Lau, deputy managing director of international property consulting firm Savills, said he was mildly surprised by the move. “The hotel is only eight years old and is still quite new, so it’s surprising to hear they’re planning to redevelop it into an office building,” he said.

He said it was impossible to compare Crowne Plaza’s financial returns with those of a future office building without detailed information about both. But he described the site as “quite small”, making it “difficult to build a major commercial building”.

“It is true that there is a strong demand for office space in Causeway Bay,” he added, saying the site was “not a prime location for commercial space in the area”.

SEA has a history of trading properties. Last year it sold Dah Sing Financial Centre in Wan Chai to mainland financial services firm China Everbright Group for HK$10 billion.

In its submission to the Town Planning Board, SEA cited the building’s proximity to commercial activities in Causeway Bay and claimed granting approval “would not set an undesirable precedent”.

SEA refused to comment when contacted by the Post.

But some local residents, such as Charlton Cheung, were unconvinced. “From my understanding, the land had a residential building on it before it was developed into a hotel with a higher plot ratio,” he said.

“If the owner wants to redevelop the land, why don’t they turn it into a residential building again, especially when there’s an acute housing shortage?”

Wan Chai district councillor Clarisse Yeung Suet-ying voiced concern that demolition and construction on the site would trigger a wave of redevelopment in the area and create a negative impact on traffic and the environment.

“The large plot of land in nearby Caroline Hill Road, now occupied by the PCCW staff club and the empty government building next to the South China Athletic Association, is earmarked to be redeveloped into commercial buildings,” she said.