Conversion rush to spur supply of outskirt hotels in Hong Kong

Lured by high investment returns, landlords proceed with plans to turn industrial buildings in decentralised areas in HK into hotel use

PUBLISHED : Wednesday, 18 March, 2015, 6:00am
UPDATED : Wednesday, 18 March, 2015, 6:00am

The number of hotels in less central parts of Hong Kong will jump about 30 per cent by 2019 as landlords convert industrial buildings for hotel use.

Despite talk of moves to restrict the number of mainland Chinese visiting Hong Kong, developers would go ahead with their redevelopment plans because they offered higher returns, said Maggie Chu, the executive director for landlord/owner representation services at Cushman & Wakefield. "Demand for this kind of lower-tariff hotels remains strong," she said.

By 2019, 24 more hotels will be under construction or built in less central areas, providing 6,087 rooms. That will take the number of hotels in decentralised areas to 101 and the total number of rooms to 38,852.

Chu said that would represent a 31 per cent increase in the number of hotels and a 19 per cent gain in the number of rooms compared with last year.

On top of this, 10 industrial buildings have been approved for conversion into hotels under the government's revitalisation programme.

Under the policy, introduced in April 2010, older industrial stock will be rejuvenated to provide commercial space for an evolving economy, mainly in the form of conversion to office space, but also hotel and retail facilities.

The government proposed a package of measures to promote the redevelopment or wholesale conversion of industrial buildings into alternative uses.

Landlords had not disclosed construction schedules, Chu said, but such transformation would provide more than 2,100 rooms when construction work was completed.

Sixty-six revitalisation projects have been approved, with the 10 marked for hotel use located in decentralised areas such as Kwai Chung, Tuen Mun, Kwun Tong and Wong Chuk Hang.

Chu said developers would continue to redevelop buildings for commercial use, including offices and hotels, spurred by higher investment returns.

She said rates for such hotels, which are classified as high-tariff B or medium-tariff hotels, ranged from HK$760 to HK$1,260 a night.

Last year, there were about 250 hotels in Hong Kong, providing 73,400 rooms. The figures will jump to 300 hotels with 83,000 rooms by 2019. Occupancy rates have remained at an average of about 90 per cent, reflecting a shortage of supply.

Even though there have been talks on restricting the number of mainland Chinese visiting Hong Kong, Chu said hotel demand from mainland Chinese remained strong, and she was optimistic about districts in West Kowloon such as Kwai Chung and Tsuen Wan.

Nearly 61 million tourists visited Hong Kong last year, with 78 per cent from mainland China.